5 International Stocks That Could Outperform the S&P 500 in 2025
Transcript:
Caroline Woods:
The S&P 500 to 8100. That’s a bold call from my next guest. But while he still likes U.S. stocks, he says some of the biggest opportunities right now might actually be abroad. Joining me now with five international stock picks is James Demmert, founder and CIO at Main Street Research. James, great to have you on.
James Demmert:
Good to see you, Caroline.
Caroline Woods:
So you still see a path to S&P 8100 this year, but none of your top picks are actually in the S&P 500. What does that tell us?
James Demmert:
It tells us that we think the S&P can reach 8100—a target that once seemed lofty, but now looks closer than many realize. And if we’re leaning into foreign markets, we believe they can actually outperform the S&P 500. The valuation gap is just that wide.
Caroline Woods:
So if investors only own U.S. stocks right now, what are they missing?
James Demmert:
First, diversification. Second, an incredible opportunity outside the U.S., where stock prices are much more reasonably priced and growth rates are just as attractive—sometimes even more. Foreign markets have outperformed the U.S. so far this year, and we expect that trend to continue.
Caroline Woods:
Let’s get into your top five picks, starting with ASML, already up big this year. Why are you still a buyer here?
James Demmert:
Everyone in tech is obsessed with Micron and the memory trade. But don’t forget ASML is the company that makes the design, manufacturing, and technology needed to produce chips. They’re integral to the entire semiconductor ecosystem. Based in the Netherlands, they trade at about 38 times earnings, but they’re growing far faster than that. It’s a really smart way to play a foreign stock.
Caroline Woods:
You mentioned Micron. Why own ASML instead of buying Micron, Nvidia, or another chip stock?
James Demmert:
We own Nvidia and Micron too. But ASML is a different part of the AI trade—it’s about design technology. It also gives us diversification outside the U.S. As the dollar continues to weaken, having assets in foreign stocks helps move away from that dollar-denominated trade.
Caroline Woods:
Next is HSBC Holdings. There are plenty of big U.S. banks to choose from. Why look overseas?
James Demmert:
It’s all about valuation. HSBC trades at nine times earnings, Caroline, while JPMorgan—which we also own—trades at a much higher multiple. You’re getting better valuation and better forward growth because we’re seeing a reinvention, a reawakening in investing outside the U.S. That’s why those indexes are beating domestic ones. HSBC is a big part of those overseas indices and a massive global investment bank with a footprint in Europe and Asia that JPMorgan doesn’t match.
Caroline Woods:
How should investors think about China risks?
James Demmert:
I’m not sure Chinese stocks themselves are investable right now. But you can invest in companies that safely do business there. That’s one reason Nvidia is desperate to open that door. So I’d focus on companies with exposure, not direct Chinese equities.
Caroline Woods:
Next on your list: Siemens Energy. It’s up about 40% year to date. Why buy here?
James Demmert:
It’s done well, and we think it will continue. The world is running out of electricity. AI is devouring power, crypto is heating up, and electric vehicles are straining the grid. Siemens Energy is focused on building out the electrical grid—not just in Germany, but globally. The stock trades at 37 times earnings, but its growth rate is below that multiple, so the valuation is reasonable for what you’re getting.
Caroline Woods:
The stock is up more than 90% over the past year. Is it too late to get in?
James Demmert:
If you’re not in yet, wait for a pullback. Buy on weakness, or maybe start with a third of a position. If you’re already in, remember these stocks can be volatile—the whole AI trade is volatile. But in our view, we’re in the third or fourth inning of a nine-inning game when it comes to the AI revolution. This is still early. Look at the tech boom of the ’90s: similar patterns in the first few years. That can extend for a long time.
Caroline Woods:
BHP Group is up more than 40% year to date. Why still like the mining space?
James Demmert:
The world needs more copper. Every new data center requires massive amounts of it. We’re also seeing a global economic expansion that will demand more materials. BHP, based in Australia, trades at 16 times earnings. Again, overseas valuations are far more attractive than in the U.S.
Caroline Woods:
Is this a commodities trade or an AI infrastructure trade?
James Demmert:
It’s both. Most people think it’s just commodities. But when you consider the demand from data centers, it’s absolutely an AI play—what I’d call the second derivative of AI.
Caroline Woods:
Finally, a healthcare play: AstraZeneca, which is essentially flat this year. Why buy a lagging healthcare stock?
James Demmert:
This is the little engine that could. Healthcare has been ignored far too long. AstraZeneca has a great pipeline of pharma and biomedical products, trades at 18 times earnings, and is growing at about 20% per year. We think the market will come back to it. Investors will start leaning into healthcare in the back half of this year as AI becomes more accretive. It’s also a great way to diversify on valuation and geography.
Caroline Woods:
So is the case for international over U.S. strictly a valuation story right now?
James Demmert:
It’s a valuation story, but also a story about global policy shifts. In the U.S., we’re tightening fiscal spending, or trying to. That money is moving to Europe, which is now adopting our old playbook—fiscal stimulus, low rates. You’re seeing those economies heat up for the first time in years. Japan too. That’s why foreign markets are outperforming, and we think this trend lasts for several years.
Caroline Woods:
Let’s do a rapid-fire round. Quick questions, quick answers. Ready?
James Demmert:
Ready.
Caroline Woods:
If you could only own one of these stocks for five years, which one?
James Demmert:
ASML.
Caroline Woods:
Which name would you cut first?
James Demmert:
AstraZeneca.
Caroline Woods:
First stock to buy on a pullback?
James Demmert:
Siemens Energy.
Caroline Woods:
Which stock doubles first?
James Demmert:
ASML.
Caroline Woods:
Most resilient if the economy slows?
James Demmert:
AstraZeneca.
Caroline Woods:
Biggest competitive advantage over rivals?
James Demmert:
Siemens Energy.
Caroline Woods:
Biggest risk to all five picks?
James Demmert:
A bear market.
Caroline Woods:
Stock that would be number six?
James Demmert:
Nvidia.
Caroline Woods:
Most underrated international market right now?
James Demmert:
Europe.
Caroline Woods:
Biggest mistake U.S. investors make when looking overseas?
James Demmert:
Not committing enough capital—being too shy.
Caroline Woods:
For a standard portfolio, how much in U.S. vs. international?
James Demmert:
We’d suggest 45% outside the U.S., the rest domestic.
Caroline Woods:
A U.S. name you’d buy and hold for five years that’s not Nvidia?
James Demmert:
Costco.
Caroline Woods:
U.S. name you’d avoid right now?
James Demmert:
Anything in real estate or consumer discretionary.
Caroline Woods:
Is that a rate story?
James Demmert:
It’s a rate story and the K-shaped economy.
Caroline Woods:
One word to describe how you’re feeling about the U.S. market from here.
James Demmert:
Bullish. But always worried.
Caroline Woods:
And one word for international?
James Demmert:
Very optimistic.
Caroline Woods:
That’s two words.
James Demmert, founder and CEO, Main Street Research. Thank you for keeping those rapid fire. And thank you for your picks and insights. I always appreciate having you on, James.
James Demmert:
Pleasure.
Caroline Woods:
For more stock picks, check out our interview with Joanne Feeney where she reveals her top five picks that could still work even if the market cools off.
This story was originally published by TheStreet on Jun 1, 2026, where it first appeared in the Video section. Add TheStreet as a Preferred Source by clicking here.