Compiled & translated by: TechFlow TechFlow
Guest: James E. Demmert, CIO of Main Street Research
Host: Caroline
Podcast source: TheStreet & James E. Demmert
Original title: 5 Foreign Stocks That Could Beat The S&P 500
Broadcast Date: June 2, 2026
Key points summary
While setting a target of 8100 points for the S&P 500 within the year, James Demmert, CIO of Main Street Research, stated that overseas stock markets will outperform US stocks. He recommended five international stocks with valuations far below their US counterparts, yet directly benefiting from the AI revolution: HSBC with a P/E ratio of 9, BHP with a P/E ratio of 16, and ASML, which he believes "if you can only hold one for five years, choose it."
Demmert believes that Europe and Japan are taking over global growth with unprecedented fiscal stimulus, and that this trend of international stock markets outperforming the United States "will continue for several years." He recommends that investors allocate 45% of their portfolios overseas.
Summary of key viewpoints
- "If investors only hold US stocks now, they are missing out on diversification first, and amazing opportunities outside the US—where stock prices are more reasonable and growth rates are equally attractive, or even higher."
- "Overseas markets have outperformed the US, and we believe this trend will continue."
Ultimate Global Chip Deployment: $ASML
- "We hold Nvidia and Micron, while ASML plays a different role in the AI deal—it provides chip design and manufacturing technology, and also gives us diversified exposure outside the US."
- "With the dollar continuing to weaken, allocating assets in the stocks of overseas companies helps to mitigate the concentration risk associated with dollar-denominated assets."
High-value global bank: HSBC
- "HSBC has a P/E ratio of only 9, making it cheaper than JPMorgan Chase, and it boasts better long-term growth prospects. As a global investment bank, its influence in Asia is unmatched by JPMorgan Chase."
- "I don't think Chinese stocks are worth investing in at the moment, but I think companies that are doing or have the ability to do business there are very worthwhile."
Energy infrastructure deployment: Siemens Energy
- "The world is facing an electricity crisis—AI is consuming electricity, cryptocurrencies are consuming electricity, and electric vehicles are consuming electricity. Siemens Energy's core business is helping the world build its power grid."
- "The AI revolution is currently in the third and fourth innings of a nine-inning game, still in its early stages. This type of stock performance—if you remember the tech boom of the 90s—trades very similarly in the first few years, and this trend can continue for quite some time."
Hidden AI Mining Stock: $BHP
- "Most people think this is just a commodity transaction, but when you consider the needs of all data centers, it's definitely an AI investment—what I call the second derivative of AI."
- "The world needs more copper. The more data centers we build, the more important the role copper will play. BHP's P/E ratio is only 16, and its valuation overseas is far better than in the US."
Undervalued healthcare stocks rebound: $AZN (AstraZeneca)
- "Healthcare has been neglected by the market for too long. AstraZeneca boasts a strong pipeline of pharmaceutical and biomedical products, a P/E ratio of 18, and annual growth exceeding 20%."
- "Investors will begin to shift their focus to the healthcare sector sometime in the second half of this year, as they will then begin to see AI begin to generate added value in the medical field."
Why are international stock markets outperforming the US stock market?
- "This is a valuation story, but it's also a story about global policy shifts. The US is tightening fiscal spending, while Europe is taking the page in our playbook—they're undertaking unprecedented massive government spending in an attempt to maintain low interest rates."
- "For the first time in many years, overseas markets have outperformed the US, and we believe this is a trend that will continue for several years."
Quick Q&A: Preferred Choices and Maximum Risks
- "If I could only hold one stock for the next five years, I would choose ASML. ASML would be the first to double in value. Siemens Energy would be the first stock I buy during a pullback."
- "The most undervalued international market is Europe. The biggest mistake American investors made was under-allocation to overseas markets; they were too conservative. We recommend allocating 45% overseas and the remainder domestically."
introduction
Host Caroline: The S&P 500 is going to reach 8100 points—that's a bold prediction from my next guest. While he remains bullish on U.S. stocks, he says some of the biggest opportunities right now might actually be overseas. Now I'm joined by James Demmert, founder and chief investment officer of Main Street Research. James, it's great to have you here.
James :
It's nice to meet you, Caroline.
Host Caroline: You still believe the S&P 500 can reach 8100 points this year, but none of your top five stock recommendations are in the S&P 500. What does this indicate?
James :
This suggests that we believe the S&P 500 can reach 8100—a target that previously seemed very high, and while not as unattainable as before, it is indeed closer than imagined. It also explains why we favor overseas markets: we believe they can actually outperform the S&P 500.
Host Caroline : What would investors miss if they only held U.S. stocks right now?
James :
I think what they missed was, firstly, diversification, and secondly, amazing opportunities outside the US —where stock prices are more reasonably priced and growth rates are equally attractive, if not higher. You may have noticed that overseas markets have outperformed the US so far this year, and we believe this trend will continue.
Recommendation 1: The Ultimate Global Chip Layout
Host Caroline: Okay, let's look at your top five stock picks, starting with ASML. This stock has already gone up a lot this year, why are you still buying it?
James :
I know everyone in the tech sector is scrambling to trade Micron and memory chips. But don't forget, ASML is a company that designs, manufactures, and technologies chips; they are an indispensable part of the entire chip manufacturing process. Headquartered in the Netherlands, they currently have a P/E ratio of 38, but their annual growth rate far exceeds that. This is an excellent entry point for investing in overseas stocks.
Host Caroline: You mentioned Micron, so why hold ASML instead of directly buying Micron, or even Nvidia or other chip stocks?
James :
We hold Nvidia and Micron. ASML is in our portfolio because it plays a completely different role in AI trading—it deals with chip design technology, and it also gives us diversified exposure outside the US. As you know, the US dollar is weakening, and allocating assets in overseas companies' stocks helps to mitigate the concentration risk of dollar-denominated assets.
Recommendation 2: High-Value Global Banks
Host Caroline: Next up is HSBC. There are plenty of quality bank stocks to buy in the US, why are you looking for banks overseas?
James :
This is an excellent question. The core issue is valuation. Caroline, HSBC's P/E ratio is only 9. In contrast, while JPMorgan Chase is an excellent company—we also hold shares— HSBC offers a better valuation and a better long-term growth outlook because what you're seeing is a resurgence of overseas investment. This is why overseas indices outperform domestic ones. HSBC is a significant component of overseas indices, and as a global investment bank, its reach extends beyond the US and Europe, boasting a presence in Asia that JPMorgan Chase cannot match.
Host Caroline: Nevertheless, how should investors view the risks associated with China?
James :
I'm not sure if the Chinese market itself is investable, but I do think you can invest in companies that can safely operate in China. I know this is one of the reasons why Nvidia is so eager to open the door to the Chinese market and sell its products there. So, I don't think Chinese stocks are investable at the moment, but I think it makes a lot of sense to invest in companies that are operating or have the ability to operate there.
Recommendation 3: Energy Infrastructure Layout
Host Caroline: Next on your list is Siemens Energy, its ticker symbol in the US is SMERY. It's up about 40% year-to-date. Why are you optimistic about this stock?
James :
It has indeed performed very well this year, and I believe this performance will continue. We need to be clear about one thing— the world is facing an electricity crisis. AI is consuming massive amounts of electricity, cryptocurrencies are consuming electricity, and electric vehicles are consuming electricity. While we are all thinking about how to increase the electricity supply, this is precisely the area that Siemens Energy focuses on. They are helping us build global power grids, not just in their headquarters in Germany, but all over the world. The stock has a P/E ratio of approximately 37, but its earnings growth rate far exceeds that.
Host Caroline: I mentioned that it performed well this year, but its one-year performance is even more impressive—over 90%. How should investors approach these stocks that have already risen so significantly? Is it too late to get in if you haven't already?
James :
If you haven't entered the market yet, my consistent advice has been to wait for a pullback and buy when the stock shows weakness, or you could start by buying one-third of your position and gradually build your holdings. If you already hold shares, remember that these types of stocks tend to be quite volatile, as does the entire AI trading sector. However, in our view, the AI revolution is currently in the third or fourth inning of a nine-inning game, still in its early stages. The performance of this type of stock—if you recall the tech boom of the 1990s—trades very similarly in the first few years, and this trend can continue for quite some time.
Recommendation 4: Hidden AI Mining Stocks
Host Caroline: Next up is BHP Group, which has also risen by more than 40% year-to-date. Why are you still optimistic about the mining sector?
James :
The world needs more copper. The more data centers we build, the more important copper becomes. We also believe we are currently in the midst of a global economic expansion, meaning the demand for raw materials will only increase, and BHP is an excellent way to participate in this trend. Headquartered in Australia, the company has a P/E ratio of only 16. Again, overseas valuations are far superior to those in the US.
Host Caroline: So is this a commodity transaction or an AI infrastructure transaction?
James :
That's its essence. Most people think it's just a commodity transaction, but when you consider the needs of all these data centers, it's definitely an AI investment—what I call the second derivative of AI.
Recommendation 5: The undervalued rebound in healthcare
Host Caroline: Lastly, we have a healthcare stock, AstraZeneca. It actually underperformed the market this year, basically breaking even. Why buy a lagging healthcare stock?
James :
This is the "little locomotive." We truly believe the healthcare sector has been overlooked by the market for far too long, and AstraZeneca boasts a very strong pipeline of pharmaceutical and biomedical products. With a P/E ratio of 18 and annual growth exceeding 20%, we believe the market will rediscover the value of these stocks.
We also believe investors will begin to shift towards the healthcare sector sometime in the second half of this year, as they will begin to see the added value and tangible contributions of AI in the medical field. Therefore, I think this will ultimately become an AI investment. Moreover, from a valuation and overseas exposure perspective, it's an excellent way to diversify a portfolio.
Why are international stock markets outperforming the US stock market?
Host Caroline: Okay, from a valuation perspective and looking at these five recommended stocks as a whole, is the logic that international stocks outperform US stocks now just a valuation story?
James :
This is a valuation story, but it's also a story about global policy shifts. As you know, the US is tightening fiscal spending, or at least trying to do so. What we've actually done is hand over growth momentum to Europe—and now it's Europe's turn to play our old game. In Europe, overseas, and in Japan, you're seeing these economies really heat up because they're undertaking unprecedented levels of government spending while trying to maintain low interest rates. That's why overseas markets have outperformed the US for the first time in years, and we believe this is a trend that will continue for several years.
Quick Q&A: Preferred Choices and Maximum Risks
Host Caroline: Now we'll move on to a quick Q&A session. If you could only hold one stock for the next five years, which one would you choose?
James : ASML.
Host Caroline: If you had to remove one from this list first, which one would you remove?
James :
AstraZeneca.
Host Caroline: Which stock was the first one you bought during the pullback?
James :
Siemens Energy.
Host Caroline: Which of these five will double in value first?
James :
ASML.
Host Caroline: If the economy slows down, which sector will be the most resilient?
James :
AstraZeneca.
Host Caroline: Which team has the biggest competitive advantage over its competitors?
James :
Siemens Energy.
Host Caroline: What is the biggest risk that these five stocks face together?
James :
Bear market.
Host Caroline: If we were to add a sixth stock to the list, what would it be?
James :
Nvidia.
Host Caroline: What is the most undervalued international market right now?
James :
Europe.
Host Caroline: What is the biggest mistake that American investors make when allocating assets overseas?
James :
The overseas deployment is insufficient; it's too conservative.
Host Caroline: For a standard portfolio, what should the allocation ratio be between the US and international positions?
James :
We recommend allocating 45% of your assets overseas and the remainder domestically.
Host Caroline: Which US stock, not Nvidia, would you recommend if I held it for five years?
James :
Costco.
Host Caroline: Which type of US stocks would you avoid now?
James :
Anything in the real estate sector and the consumer discretionary sector.
Host Caroline: Is this because of interest rates?
James :
It's an interest rate issue, and it's also related to the K-shaped economic model.
Host Caroline: Okay, describe your feelings about the current US market in one word.
James :
I'm bullish, but always worried.
Host Caroline: Describe your feelings about the international market in one word.
James :
Very optimistic—these are two words.
