5 Foreign Stocks to Hedge Your Portfolio Risk

Adding gloom to the already ominous start to 2016 (equity market turmoil in China spilling across the global marketplace), the new report from the World Bank has projected global economic growth of 2.9% for 2016, down 0.4% from its Jun 2015 prediction.

Wondering why you should be worried about this? Apart from global economic projections, the World Bank report stated that the U.S. economy will grow at a marginal pace of 2.4%, half that of the growth rate of 4.8% for developing countries.

Additionally, the U.S. economy has been facing a host of other problems including appreciating dollar, continued fall in crude prices and increasing competition from developing economies. All these factors are hurting the financials of U.S. companies.

So would it be better to stay away from the stock market? The answer is no.

You should instead adopt the right strategy to hedge the risk of your investment portfolio. And an appropriate strategy could be diversifying your portfolio by adding a few foreign stocks. These companies, mainly operating in their home countries, bear an advantage of being largely influenced by local economic growth.

You must be thinking that investing in foreign companies is riskier than investing in domestic firms, owing to uncertainties related to currency devaluations, different business practices and lack of transparency. But a comprehensive fundamental and economic analysis shows that some foreign stocks can be more rewarding now.

To help you internationalize your portfolio, we have hand-picked the foreign companies with the help of Zacks Stock Screener . We have selected foreign stocks that have market capitalization of $5 billion or more and carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). With the help of our Style Score System , we further narrowed down the list to ensure a Value Style Score of 'A.'

The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of A or B, when combined with Zacks Rank of 1 or 2, offer the best upside potential.

Here are the 5 top picks for your consideration:

CEMEX, S.A.B. de C.V.CX is one of the largest cement companies in the world. The company sells cement, ready-mix concrete, aggregates and other construction materials in Mexico, the U.S., Northern Europe, the Mediterranean, South America, the Caribbean and Asia.

Zacks Rank: #2

Home Country: Mexico

Market Cap: $5.80 billion

Growth rate for 2016: 170.73%

ArcelorMittalMT is the world's leading steel and mining company. With a presence in more than 60 countries, it operates a balanced portfolio of cost-competitive steel plants across both the developed and developing world.

Zacks Rank: #2

Home Country: Luxembourg

Market Cap: $5.73 billion

Growth rate for 2016: 107.94%

EricssonERIC is a leading provider of communication networks, telecom services and support solutions.

Zacks Rank: #2

Home Country: Sweden

Market Cap: $29.59 billion

Growth rate for 2016: 17.02%

Honda Motor Co., Ltd.HMC is a leading manufacturer of automobiles and the largest producer of motorcycles in the world.

Zacks Rank: #2

Home Country: Japan

Market Cap: $52.07 billion

Growth rate for 2016: 16.49%

Etablissements Delhaize Frères et Cie "Le Lion" (Groupe Delhaize) SADEG operates food supermarkets. It also operates other store formats, including proximity, cash and carry, and specialty stores.

Zacks Rank: #1

Home Country: Belgium

Market Cap: $10.00 billion

Growth rate for 2016: 11.64%

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ERICSSON LM ADR (ERIC): Free Stock Analysis Report

HONDA MOTOR (HMC): Free Stock Analysis Report

CEMEX SA ADR (CX): Free Stock Analysis Report

DELHAIZE-LE (DEG): Free Stock Analysis Report

ARCELOR MITTAL (MT): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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