This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Three Reasons to Buy Shares Through the London Stock Exchange

NEW YORK (TheStreet) -- On Wednesday, when it was announced that the U.S. gross domestic product fell 2.9% during the first quarter, the Dow Jones Industrial Average and Standard & Poor's 500 Index rose, and stocks such as Apple (AAPL) and Google (GOOG) cruised near 52-week highs.

Those who fear a that there's a disconnect between the stock market and the U.S. economy may want to look at the London Stock Exchange. There are three reasons to consider investing in publicly traded companies on that exchange.

Reason No. 1 is that there are many excellent companies listed on the LSE, especially small caps. Take, for example, Audioboom Group (LON: BOOM), which owns Audioboo, a rapidly growing Web site and app that lets users share audio files.

The second and third reasons is that the LSE offers a lower price and a higher dividend yield on average than U.S. stocks.

The FTSE 100, the blue-chip index of the 100 companies with the largest market capitalizations listed on the LSE, is trading at a price-to-earnings ratio of 14.1 with an average dividend yield of 3.4%. By contrast, the S&P 500 Index has an average P/E ratio of 19.6 with a dividend yield of about 1.8%.

Many major British companies such as British Airways (BAIRY) and BAE Systems (BAESY) trade in the U.S. on the OTC Bulletin Board, an electronic trading service. But for many other British companies, you have to buy the stock on the London exchange. That isn't hard.

Charles Schwab (SCHW), for instance, offers the Schwab Global Account. With that, Schwab clients can trade online with U.S. dollars in foreign markets through the local currencies that are converted by those affiliated with the brokerage. Schwab charges a commission of at least $100 for this service, along with a currency conversion fee.

The top brokers for international trading as rated by are ETrade (ETFC), Firstrade Securities, Interactive Brokers (IBKR), MB Trading, OptionsHouse and Questrade, a Canadian discount broker.

It is very difficult for an individual American investor to open a foreign account, and so trading through ETrade, Schwab or another domestic broker is the most feasible way to buy shares on a foreign exchange.

Here's Why Rates Will Rise Sooner Than Investors Anticipate

If Apple Focused on iTV, It Could Be as Big as iPhone and iPad

A Refresher on Defensive Investing

At the time of publication, the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%
YHOO $44.45 0.00%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs