How to Make International Plays Without Getting Played

"The U.S. economy has turned down sharply. Risks continue to be to the downside," Treasury Secretary Henry Paulson explained at a Council of Institutional Investors conference last week. But just because we're going through a hard patch here at home doesn't mean your portfolio needs to take a hit.

Buy American? Not Today.

"Buy American." It's a battle cry that's been used by domestic auto manufacturers like Ford F and GM GM for decades. However, ask our country's top corporate executives, and chances are, you'll hear that sentiment isn't true for stocks -- at least, so far this year.

"There is no growth in the [U.S.] economy right now," FedEx FDX CEO Fred Smith told Reuters in an interview last week.

So where's the growth? As it turns out, things are mostly going on overseas. GE GE CEO Jeffrey Immelt explained things in a Friday, April 11 interview on CNBC: "Outside the United States, we're just not seeing a slowdown yet... the global markets remain robust."

If you're looking for a way to take some of that domestic economic sting out of your portfolio, finding stocks with some significant international exposure might just be the ticket. Almost echoing Immelt, Smith said, "The only positive story in the U.S. economy right now is U.S. exports."

But that doesn't mean that you have to put your money in risky places. Developed economic powers like France and the United Kingdom have lots of potential for the investor looking for some global plays.

Finding these global stocks isn't always easy, so here's the lowdown.

Go Global With ADRs

If you want to invest in companies that have full international exposure, consider American Depositary Receipts (ADRs). An ADR is a certificate that trades on major American exchanges like the New York Stock Exchange or the American Stock Exchange, but represents ownership of a foreign company. The beauty of ADRs is that you can buy and sell them just as if they were shares of any U.S.-based company.

With listed ADRs, companies have to meet exchange requirements (for more on those, check out "What Happens When My Stock is Delisted"), and file with the SEC . So when you buy an exchange-traded ADR, you're buying a reputable foreign company whose financials are at least comparable to a domestic company.

A couple of examples of heavy-hitting ADRs are Chinese telecommunications company China Mobile CHL, Aussie mining company BHP Billiton BHP and Brazilian energy giant Petrobras PBR.

However, not all companies with ADRs trade on major exchanges. Be wary of companies that trade over-the-counter . "OTC" companies tend to be riskier than exchange-traded ADRs and might not be your best bet if you're trying to shore up your portfolio. (If you are interested in riskier international companies, check out "How Do I Invest Overseas?")

Emerging Returns With ETFs

ETFs (exchange-traded funds) have long been a great way to add some international diversification to your portfolio. They're available for most regions and they provide a more diversified way to get into overseas stocks than ADRs.

The most popular international ETFs follow indices of foreign stocks, such as the iShares MSCI Brazil Fund EWZ, which tracks the MSCI Brazil Index.

But don't think that you're relegated to emerging markets like Brazil to get a piece of the foreign ETF action. Barclays' BCS iShares family of funds, for example, has ETFs out there for developed markets like France EWQ, Japan EWJ, U.K. EWU and a plethora of other markets.

Another interesting new development in ETFs is the addition of currency-based funds that have sprung up over the past couple of years. With today's falling dollar, ETFs like the CurrencyShares Euro Trust FXE are proving their value.

Mighty Internationals

Believe it or not, another way to add international exposure to your portfolio is by investing in domestic companies right here in the United States.

How?

The trick is to find companies such as GE, Corning GLW, FedEx, and Hewlett-Packard HP. Multinationals like these make a lot of their money overseas. And there are hundreds of them out there.

Wrigley Around the World

The S&P is down over 9% since January, but stalwart Wm. Wrigley Jr. Company WWY is up over 6% during the same time. Why? A big part of it is because the chewing gum company made almost 70% of its revenue outside of North America last year. Those two facts are no coincidence.

Now, ready to go multinational hunting?

You can find out about a domestic company's international exposure simply by skimming through its annual report and checking out the "sales by region" section.

Here is a look at Wrigley's international numbers (pulled from the annual report on the company's Web site).

Source: Wm. Wrigley Jr. Company, 2007 Annual Report

Source: Wm. Wrigley Jr. Company, 2007 Annual Report

Making International Plays Without Getting Played

As with any investment you make, one of the most important rules is "know what you own." Just because a stock has international exposure alone doesn't necessarily make a good investment case for it. Any stock you select has to stand on its own fundamentals .