Goldman Sachs: Buy these 17 stocks with a strong international presence to capitalize on the economic recovery in China and Europe.

  • Goldman Sachs says stocks with more reliance on China or Europe are beating US-focused stocks.
  • Chief US equities strategist David Costin says his firm no longer expects a recession in Europe.
  • This is partly why he believes stocks in China and Europe have more upside potential than the S&P 500.

The US has been a place to invest for a long time, but pundits who think this will change in 2023 can certainly give a long list of reasons international equities are poised to outperform.

David Costin, chief equity strategist at Goldman Sachs in the US, listed some of the most important reasons in a recent note to clients. He believes that the trajectory of the US economy is now unclear, but that China and Europe are doing better. So much better, in fact, that Europe can avoid a recession entirely.

“Growth prospects in China and Europe have improved markedly” thanks to the end of China’s anti-COVID policy and falling gas prices in Europe, he wrote. “Our economists have raised their GDP forecasts in both regions and no longer expect a recession in the eurozone this winter.”

Kostin wrote that as of Jan. 20, Goldman Sachs’ list of high-selling stocks in China outperformed the S&P 500 by 5 percentage points, thanks to a weaker dollar that helped US companies earn higher profits from overseas sales.

Kostin said Asian equities strategists at Goldman believe profits will rise 13% this year, and they forecast a 9% rise in the MSCI China index.

“They still see upside potential as the rest of the index catches up with the cyclical stocks that led the move. Our markets team also sees further upside potential for China-sensitive assets,” he said.

He added that stocks with high international exposure, not just China, outperformed their US counterparts for the same reasons. For example, Europe has benefited from the reopening of the Chinese economy, as well as a milder-than-expected winter.

In short, he believes stocks with a large percentage of international sales are poised for a very strong 2023.

All of the 17 companies listed below derive at least 80% of their revenue from markets outside the US, which means they will be the main beneficiaries of the trends noted by Kostin. By comparison, the median S&P 500 company earns 29% of its revenue outside the US.

The stocks below are ranked from lowest to highest based on the percentage of income they receive from overseas markets.

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