Bank stocks are under pressure since the Brexit vote. European banks have been hit hard compared to their American peers. The STOXX® Europe 600 Banks Index is down about 36% year-to-date in Euro price terms. Some of the British banks have reached their 52-week lows.

With all the carnage in the banking sector and related sectors, some investors may be wondering if there are any bank stocks that are worth buying at current levels. Here are some thoughts on this topic:

British banks such as Barclays(BCS), HSBC(HSBC), etc. can be avoided at this time.

Investors can also stay away from Deutsche Bank(DB) due to the ongoing crisis. In addition, the bank has suspended dividends and is sitting on a gigantic derivatives pile whose notional value runs in the trillions. Though the bank will be bailed out should it collapse equity holders may not be saved by the state.

Scandinavian banks are worth considering since they are outside of the Euro zone and have better prospects.

Among US banks strong regionals and select small and mid-size banks look attractive.

High-quality emerging banks also offer opportunities.

Last year I wrote an article on the world’s strongest banks quoting a Bloomberg. The chart from that piece is reproduced below.

Disclosure: No positions

One of the reasons to invest in foreign stocks is to reduce risk. Simply putting all eggs in one basket is not a good idea. Though U.S. markets may seem stable and have earned better returns recently it does not mean they will continue to do so year after year. By adding exposure to foreign companies an investor can reduce risks of concentration in a single country and also benefit from diversification.

Here is an excerpt from an article by Dan Egan at Betterment:

As such, a well-diversified portfolio helps you manage risk—meaning it reduces the extremes of your ups and downs, keeping you humming along in the center lane of performance.

In the chart below, we show rolling two-year returns of the U.S. stock market (light blue) and developed international stock markets (dark blue). The gray shading indicates a period of time where international markets beat domestic markets. As you can see, international wins about 50% of the time. With a diversified portfolio, you’re aiming for the middle of U.S. and international stocks. That doesn’t mean experiencing zero losses—it means getting average gains.

Domestic and International Returns

Source: Why You Should Invest Beyond U.S. Stocks, Betterment

Though some American investors may feel that “America is already great” with thousands of world-class companies and why should I have to care about third-rate companies in some god-forsaken country the reality is much different. So instead of restricting their investments to home country investors are better off exploring and diversifying with international stocks.

But see:

• The real risk behind international investing (Dividend Growth Investor)

When equity markets turn volatile astute investors go hunting for high-quality stocks. During such periods, market participants engage in indiscriminate selling by dumping both good and bad companies. This leads to situations where stocks of well-established high-quality companies tend to trade at cheap levels. For example, early 2009 was a great time to buy equities as the Global Financial Crisis was peaking. Since then the US market has more than doubled. However due to the fear of the unknown not many investors including myself were brave enough to take the plunge and buy stocks at that time.

The main point to remember is there will always be crises and market corrections. The trick for most retail investors is to take advantage of opportunities when it seems like the world is about to end. In a globalized world, it is not possible to expect perfect market conditions such as no crisis, no wars, no geo-political risks, etc.

From an article by Kurt Feuerman at Alliance Bernstein:

In recent years, investors have had to cope with plenty of uncertainty: three summers worth of the Greek default crises (2010, 2011, 2012); the US “fiscal cliff” in early 2013 and the government shutdown that October; the Ukraine–Russia conflicts; the collapse in oil prices; China’s slowdown and currency devaluation; and now, Brexit.

In terms of severity, we believe that the current chaos surrounding Brexit falls toward the bottom of the list. Sure, the market reacted quite alarmingly in the first two days—as much due to the unexpected result as to the unknown full, long-term implications of the decision to exit the European Union. But we’re already seeing some stabilization following that immediate global market reaction.

And therein lies one of the preeminent lessons of long-term investing.

Corrections Often Need Corrected Vision

While it’s happening, a correction feels terrible. But despite the many corrections and spikes in volatility during this cycle (from March 9, 2009, through June 29, 2016), the S&P 500 Index hasn’t collapsed. In fact, it climbed 206%, or an annual average of about 16%, over that period (Display). In other words, all those episodes of volatility have created attractive opportunities to buy stocks. And in our view, that holds true now—perhaps even more than over the past seven years.

More recently, the markets have lost some steam. For roughly the past 12 months, the net market movement has been flat (just slightly lower after the past several days), despite increased volatility. The rising tide that lifted all boats for the past several years probably won’t help an investor’s returns going forward.

Instead of relying on market returns, it may prove more useful to keep an eye on the long term, and to look at the volatility of any particular moment with more objectivity than emotion.

Source: Beware of “Perma-Bears” in Volatile Markets by Kurt Feuerman, Alliance Bernstein

Investors looking to deploy capital during the current volatility can consider the following foreign stocks:

1.Company: Fresenius Medical Care AG & Co (FMS)
Current Dividend Yield: 1.04%
Sector: Health Care Providers & Services
Country: Germany

2.Company: Novo Nordisk A/S (NVO)
Current Dividend Yield: 1.77%
Sector: Pharmaceuticals
Country: Denmark

3.Company: Siemens AG (SIEGY)
Current Dividend Yield: 3.66%
Sector:Industrial Conglomerates
Country: Germany

4.Company: Magna International Inc(MGA)
Current Dividend Yield: 2.85%
Sector: Auto Components
Country: Canada

5.Company: Valeo SA (VLEEY)
Current Dividend Yield: 2.39%
Sector: Auto Components
Country: France

6.Company: Nestle SA (NSRGY)
Current Dividend Yield: 2.97%
Sector: Food Products
Country: Switzerland

7.Company: Nordea Bank AB (NRBAY)
Current Dividend Yield: 8.56%
Sector: Banking
Country: Sweden

8.Company: DBS Group Holdings Ltd(DBSDY)
Current Dividend Yield: 3.73%
Sector: Banking
Country: Singapore

9.Company: Legal & General PLC (LGGNY)
Current Dividend Yield: 7.69%
Sector: Insurance
Country: UK

10.Company: Royal Dutch Shell PLC (RDS-A)
Current Dividend Yield: 6.77%
Sector:Energy
Country: UK

Note: Dividend yields noted above are as of July 1, 2016. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long MGA