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By Numer de Guia An investment vehicle known as

American depositary receipts can add a little foreign flavor to a U.S. investor's portfolio. ADRs are receipts held by a U.S. bank that represent stock in a non-U.S. company. ADRs, and a similar instrument known as American depositary shares, trade in U.S. dollars on U.S. stock exchanges, making it simpler for U.S. investors to invest on overseas markets.

With investor interest strong in playing the global economy -- especially China -- it's no surprise that ADRs as a group performed well in the 12 months ended Mar. 31, 2004. The S&P ADR index -- which includes securities in the Standard & Poor's 700, the non-U.S. component of the S&P Global 1200, that can be traded and settled in the U.S. -- returned 54% in that period.

WEAVING THE NET. Many experts continue to recommend that investors keep a portion of their equity holdings in non-U.S. stocks. S&P's Investment Policy Committee now advises that individuals keep 65% of their portfolios in stocks -- 50% in domestic stocks and 15% in foreign issues.

With that in mind, we set out to look for those ADRs that have outperformed the S&P ADR index in the past 12 months. And we used an additional filter to ensure that our list included attractive candidates: The underlying foreign stocks of these ADRs had to be ranked 4 STARS (accumulate) or 5 STARS (buy) by S&P's Asia- and Europe-based teams of equity analysts. That means they are expected to outperform the overall market over the next 6 to 12 months.

These 21 names turned up:

Top-ranked ADRs


Aluminum Corp. of China (ACH)

Sinopec Beijing Yan Petro (BYH)

British Airways (BAB)

Yanzhou Coal (YZC)

Chartered Semiconductor (CHRT)


BAE Systems (BAESY)

Huaneng Power (HNP)

Mitsubishi Electric (MIELY)

Deutsche Lufthansa (DLAKY)

LVMH Moet Hennessy (LVMUY)

Philips Electronics (PHG)

China Southern Airlines (ZNH)

UTD Microelectronics (UMC)

E.on (EON)

Taiwan Semiconductor (TSM)

Acambis (ACAM)

ABN Amro (ABN)

BNP Paribas (BNPZY)

Cheung Kong Holdings (CHEUY)

China Eastern Airlines (CEA)

De Guia is an analyst for Standard & Poor's Portfolio Services

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