I decided to analyze the calendar returns of international stocks which are traded in the US. I used categories based on definitions from The Economist Intelligence Unit ( Democracy Index 2021 – Economist Intelligence Unit (eiu.com) ) and MSCI ( MSCI – Powering better investment decisions – MSCI ). The categories I used are:
- Full Democracy
- Flawed Democracy
- Hybrid Regime
- Authoritarian Regime
- Developed Markets
- Emerging Markets
- Emerged Markets
All returns are market cap weighted. All stocks had an initial price greater than $5 to prevent unrealistic skewing of the data.
| Category | Average (2017-2021) | Deviation | Count |
|---|---|---|---|
| Full Democracy | 11.25% | 14.54% | 782 |
| Flawed Democracy | 9.03% | 13.74% | 285 |
| Hybrid Regime | 2.59% | 11.98% | 51 |
| Authoritarian Regime | 8.61% | 30.09% | 122 |
| Developed Markets | 10.25% | 13.68% | 954 |
| Emerging Markets | 10.58% | 21.74% | 264 |
| Emerged Markets | 5.41% | 14.06% | 114 |
As one can see, the companies that are domiciled in full democracies outperformed other categories, and definitely had a lower risk than companies from authoritarian regimes or emerging markets. From this point on, I will probably avoid anything that is not from a healthy country. Over the next week, I will create a watchlist of stocks from full democracies and flawed democracies based on my quantitative models. Here is my list of growth stocks from full democracies:
- United Microelectronics Corporation (NYSE: $UMC) operates as a semiconductor wafer foundry in Taiwan, Singapore, China, Hong Kong, Japan, the United States, Europe, and internationally. It operates through Wafer Fabrication and New Business segments. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design companies and integrated device manufacturers. United Microelectronics Corporation was incorporated in 1980 and is headquartered in Hsinchu City, Taiwan.
- Magnachip Semiconductor Corporation (NYSE: $MX), together with its subsidiaries, designs, manufactures, and supplies analog and mixed-signal semiconductor platform solutions for communications, the Internet of Things, consumer, industrial, and automotive applications. It provides display solutions, including source and gate drivers, and timing controllers that cover a range of flat panel displays used in mobile communications, automotive, entertainment devices, notebook PCs, monitors and liquid crystal displays, organic light-emitting diodes, and micro light-emitting diode (LED) televisions. The company also offers metal oxide semiconductor field-effect transistors, insulated-gate bipolar transistors, AC-DC converters, DC-DC converters, LED drivers, switching regulators, linear regulators, and power management integrated circuits for a range of devices comprising televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebooks, tablet PCs, and other consumer electronics, as well as for power suppliers, e-bike, photovoltaic inverter, LED lighting, motor drive, and home appliances; and organic light-emitting diode display driver integrated circuits for OLED TVs. It serves consumer, computing, and industrial electronics original equipment manufacturers, original design manufacturers, and electronics manufacturing services companies, as well as subsystem designers in Korea, the Asia Pacific, the United States, Europe, and internationally. The company sells its products through a direct sales force, as well as through a network of agents and representatives; and distributors. Magnachip Semiconductor Corporation is based in Luxembourg, Luxembourg.
All data from www.portfolio123.com
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