Buying Foreign Stocks: To ADR Or Not To ADR

Since my 10 Clean Energy Stocks for 2021 list contains 5 foreign stocks this year, a reader asked about the relative merits of buying a foreign stock compared to a US ADR. Here is a summary of the relative merits (for US investors) of buying a foreign stock directly compared to buying the American Depository Receipt (ADR). ADR

First, let’s look at the tickers for the five foreign stocks in the list. There are four types of ticker in the list this year:

  1. The stock on its home exchange in the local currency. These have the form TICKER.EX, where TICKER is the stock ticker on the foreign exchange, and EX is an abbreviation for the name of the exchange. European stocks usually trade on several European exchanges. I try to use the ticker on the exchange with the most liquidity, which is usually also in the company’s home country.
  2. The US ticker for the foreign stock – a five-letter ticker ending in F.
  3. An unlisted ADR – a five-letter ticker ending in Y which trades over the counter.
  4. A listed ADR – this is an ADR that trades on a US stock exchange such as the NASDAQ or NYSE.

For the companies in the list this year, MiX Telematics is the only one with a listed ADR, MIXT. I don’t usually mention its listing on the Johannesburg stock exchange, MIX.JO because it does not have a corresponding US ticker, but include it here for completeness.

The others all have unlisted ADRs:

Company Foreign Exchange Foreign Ticker US Ticker US ADR ADRs per Foreign share Approx ADR fees in 2020 per ADR
MiX Telematics Johannes-burg MIX.JO   MIXT 1/25 $0.012
Red Electrica Madrid REE.MC RDEIF RDEIY 2 $0.056
Valeo, SA Paris FR.PA VLEEF VLEEY 2 $0.027
Veolia Paris VIE.PA VEOEF VEOEY 1 $0.085
Umicore Brussels UMI.BR UMICF UMICY 4 $0.03
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