Organization & Compilation: Deep Tide TechFlow

Guest: James E. Demmert, Main Street Research CIO

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 Summary

Main Street Research CIO James Demmert forecasts a target of 8100 points for the S&P 500 this year while stating that international stock markets will outperform US stocks—he provided five international candidates that are valued significantly lower than their US counterparts but directly benefit from the AI revolution: HSBC at 9 times earnings, BHP at 16 times earnings, and ASML, which he believes is "the one to hold for five years if you can hold only one."

Demmert asserts that Europe and Japan are taking over global growth with unprecedented fiscal stimulus, and this trend of international markets outperforming the US "will continue for years," recommending investors allocate 45% of their positions overseas.

Highlights Summary

• "If investors are currently holding only US stocks, they are missing out on diversification first and subsequently the amazing opportunities outside of the US—where valuations are more reasonable, and growth rates are equally attractive or even higher."
• "Overseas markets have already surpassed the US, and we believe this trend will persist."

The Ultimate Global Chip Play: $ASML

• "We hold Nvidia and Micron, and ASML plays a different role in the AI trade—it provides chip design and manufacturing technology while also giving us exposure to diversification outside the US."
• "The US dollar continues to weaken, and allocating assets in overseas company stocks helps to alleviate concentration risk measured in dollars."

High-Value Global Bank: $HSBC

• "HSBC has a price-to-earnings ratio of only 9, cheaper than JPMorgan, and has a better forward growth outlook. As a global investment bank, its influence in Asia is incomparable to JPMorgan."
• "I don't think Chinese stocks are investable at this point, but companies that are conducting or capable of conducting business there are quite meaningful."

Energy Infrastructure Play: Siemens Energy

• "The world is facing an electricity crisis—AI consumes power, cryptocurrencies consume power, and electric vehicles consume power. Siemens Energy's core business is helping to build power grids worldwide."
• "The AI revolution is still in the third or fourth inning, it is still in its early stages. The performance of this type of stock—if you remember the tech boom of the 90s—followed a very similar trading pattern in the early years, and this trend can last a long time."

Hidden AI Mining Stock: $BHP

• "Most people think this is just a commodity trade, but when you consider the demand of data centers, this is definitely an AI investment—I call it the second derivative of AI."
• "The world needs more copper. The more data centers we build, the more important copper is in them. BHP has a price-to-earnings ratio of only 16, with overseas valuations far superior to the US."

Undervalued Healthcare Stock Rebound: $AZN (AstraZeneca)

• "Healthcare has been overlooked by the market for too long. AstraZeneca has a strong pipeline of pharmaceuticals and biomedical products, a price-to-earnings ratio of 18, and annual growth exceeding 20%."
• "Investors will start to shift towards the healthcare sector at some point in the second half of this year because they will feel the value-added effects of AI starting to contribute in healthcare."

Why International Markets Are Outperforming the US

• "This is a valuation story, but it's also a story about global policy changes. The US is tightening fiscal spending, while Europe is taking a page out of our playbook—they are conducting unprecedented large-scale government fiscal spending while trying to maintain low interest rates."
• "The overseas markets have outperformed the US for the first time in years, and we believe this will be a trend that continues for several years."

Quick Q&A: Favorites and Biggest Risks

• "If I could only hold one stock for the next five years, it would be ASML. The first to double will be ASML. The first to buy on a dip will be Siemens Energy."
• "The most undervalued international market is Europe. The biggest mistake American investors make is being too conservative with overseas allocations. We recommend a 45% allocation overseas and the rest domestically."

Introduction

Host Caroline: The S&P 500 hitting 8100 points—this is a bold prediction made by my next guest. Though he remains optimistic about US stocks, he states that some of the biggest opportunities currently may actually be overseas. Joining me now is James Demmert, founder and CIO of Main Street Research. James, it's a pleasure to have you.

James:

It's great to see you, Caroline.

Host Caroline: You still believe the S&P 500 can reach 8100 this year, but none of your top five recommended stocks are in the S&P 500. What does that indicate?

James:

It indicates that we believe the S&P can reach 8100—this target previously seemed very high, and while it doesn’t seem as unattainable as before, it is indeed closer than we imagined. It also shows that if we are inclined towards overseas markets, it is because we believe they can actually outperform the S&P 500.

Host Caroline: What will investors miss out on if they are currently holding only US stocks?

James:

I think what they are missing out on is first, diversification, and secondly, they are missing amazing opportunities outside the US—where stock prices are more reasonably priced, and growth rates are equally attractive or even higher. You may have noticed that so far this year, overseas markets have already surpassed the US, and we believe this trend will continue.

Recommendation 1: The Ultimate Global Chip Play

Host Caroline: Let’s take a look at your top five recommended stocks, starting with ASML. This stock has already risen a lot this year, why are you still buying it?

James:

I know everyone is rushing toward Micron and storage chip trades in the tech field. But don’t forget, ASML is a company engaged in chip design, manufacturing, and technology, and they are an indispensable part of the entire chip manufacturing process. The company is headquartered in the Netherlands with a current price-to-earnings ratio of 38, but their annual growth rate far exceeds this level. This is a very good entry point for investing in overseas stocks.

Host Caroline: You mentioned Micron, so why hold ASML instead of buying Micron directly or even Nvidia or other chip stocks?

James:

We hold Nvidia, and we also hold Micron. ASML is in our portfolio because it plays a completely different role in AI trading—it provides chip design technology while also giving us exposure to diversification outside the US. You know, the dollar is continuing to weaken, and allocating assets in overseas company stocks helps to alleviate concentration risk measured in dollars.

Recommendation 2: High-Value Global Bank

Host Caroline: Next is HSBC Holdings. There are a lot of quality bank stocks in the US to buy, why look overseas for banks?

James:

This is a very good question. The core lies in valuation. Caroline, HSBC has a price-to-earnings ratio of only 9. In contrast, JPMorgan is a very excellent company—we also hold it—but HSBC offers better valuation and better forward growth prospects, as you are witnessing a renaissance in overseas investments. That’s why overseas indices are performing better than the US. HSBC is an important part of the overseas index, and as a global investment bank, its business scope extends beyond the US and Europe, having an unmatched presence in Asia.

Host Caroline: Nevertheless, how should investors view the risk of China?

James:

I'm not sure if the Chinese market itself is investable, but I do believe you can invest in companies that can safely conduct business in China. I know that this is one of the reasons Nvidia is eager to open the door to the Chinese market and sell products there. So, I don't think Chinese stocks are investable at this point, but companies conducting business or capable of conducting business there are quite meaningful.

Recommendation 3: Energy Infrastructure Play

Host Caroline: The next on your list is Siemens Energy, which trades as SMERY in the US. It has risen about 40% year-to-date, why do you favor this stock?

James:

It has indeed performed 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 consumes a lot of power, cryptocurrencies consume power, and electric vehicles consume power. While we all think about how to increase the electricity supply, this is exactly where Siemens Energy focuses. They are helping us build a global power grid, not just in Germany, where their headquarters is located, but around the world. This stock has a price-to-earnings ratio of about 37, but the profit growth far exceeds this level.

Host Caroline: I mentioned that the stock has performed well this year, but its one-year performance is even more impressive—over 90%. How should investors treat stocks that have already risen significantly? If they haven't entered the market yet, is it too late now?

James:

If they haven't entered the market yet, my usual advice is to wait for a dip and buy when the stock is showing weakness, or perhaps buy one-third of a position and build up gradually. If you already hold it, remember that stocks like this can be quite volatile; the volatility of the entire AI trade is high. But from our perspective, the AI revolution is still in the third or fourth inning and is still in its early stages. The performance of this type of stock—if you remember the tech boom of the 90s—followed a very similar trading pattern in the early years, and this trend can last a long time.

Recommendation 4: Hidden AI Mining Stock

Host Caroline: Next is BHP Group, which has also risen over 40% year-to-date. Why do you still favor the mining sector?

James:

The world needs more copper. The more data centers we build, the more important copper's role becomes. We also believe that we are currently in a phase of global economic expansion, which means the demand for raw materials will only increase, and BHP is a great way to participate in this trend. The company is headquartered in Australia and has a price-to-earnings ratio of only 16. Again, it emphasizes that overseas valuations are far superior to those in the US.

Host Caroline: So is this ultimately a commodity trade or an AI infrastructure trade?

James:

That’s the essence of it. Most people think this is just a commodity trade, but when you consider the demand from all these data centers, this is definitely an AI investment—I call it the second derivative of AI.

Recommendation 5: Undervalued Healthcare Rebound

Host Caroline: Lastly, a healthcare stock, AstraZeneca, which has actually underperformed this year compared to the market, remaining basically flat. Why buy a lagging healthcare stock?

James:

This is that "little locomotive." We really believe the healthcare sector has been overlooked by the market for too long, and AstraZeneca has a very strong pipeline of pharmaceuticals and biomedical products. Its price-to-earnings ratio is 18, with an annual growth exceeding 20%. We believe the market will recognize these stocks' value again.

We also believe that investors will start shifting towards the healthcare sector at some point in the second half of this year as they will feel the value-added effects of AI starting to deliver real contributions in the healthcare sector. So, I think this will ultimately also become an AI investment. Moreover, from a valuation and overseas exposure perspective, this is an excellent way to diversify a portfolio.

Why International Markets Are Outperforming the US

Host Caroline: From a valuation perspective and considering the overall logic of these five recommended stocks, is the notion that international stocks outperform the US a pure valuation story right now?

James:

It is a valuation story, but it is also a story about global policy changes. You know that the US is tightening fiscal spending or is trying to do so. What we are actually doing is handing the growth momentum over to Europe—now it’s Europe's turn to replicate our past script. In Europe, overseas, and Japan, you are seeing these economies truly heating up because they are undertaking unprecedented massive government fiscal spending while trying to maintain low interest rates. That’s why the overseas markets have outperformed the US for the first time in years, and we believe this will be a trend that continues for several years.

Quick Q&A: Favorites and Biggest Risks

Host Caroline: Next, let’s move to the 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 stock from this list first, which one would it be?

James:

AstraZeneca.

Host Caroline: Which stock would you buy first on a dip?

James:

Siemens Energy.

Host Caroline: Which of these five will double first?

James:

ASML.

Host Caroline: Which one is the most resilient in the event of an economic slowdown?

James:

AstraZeneca.

Host Caroline: Which one has the biggest competitive advantage compared to its peers?

James:

Siemens Energy.

Host Caroline: What is the biggest risk that all five of these stocks face together?

James:

A bear market.

Host Caroline: If you could add a sixth stock to this list, what would it be?

James:

Nvidia.

Host Caroline: What is currently the most undervalued international market?

James:

Europe.

Host Caroline: What is the biggest mistake American investors make when allocating overseas assets?

James:

Being too conservative with their overseas allocations.

Host Caroline: What should be the typical allocation ratio between the US and international positions in a standard investment portfolio?

James:

We recommend a 45% allocation overseas and the rest domestically.

Host Caroline: If you were to hold an American stock for five years that is not Nvidia, which one would you recommend?

James:

Costco.

Host Caroline: Which type of US stocks would you avoid right now?

James:

Anything in the real estate sector and discretionary consumer goods.

Host Caroline: Is that related to interest rate issues?

James:

Yes, it is related to interest rate issues, as well as the K-shaped economy.

Host Caroline: Okay, one word to describe your feelings about the current US market.

James:

Optimistic but always cautious.

Host Caroline: One word to describe your feelings about the international market.

James:

Very optimistic—this is two words.

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