When I invest in international stock mutual funds, I look for funds that give me exposure to foreign markets with solid potential for growth and diversification. These funds pool money to invest in companies headquartered outside the U.S., which helps reduce domestic risk and provides a hedge against local downturns. After analyzing several top-performing international stock mutual funds, I noticed that a few companies consistently appear across many of them. In this article, I’ll break down three of those global companies, explain why mutual funds hold them, and show how their inclusion affects overall returns and volatility.
Table of Contents
Why International Diversification Matters
I always remind myself that the U.S. makes up about 60% of the global stock market. That means 40% lies outside our borders. If I ignore international stocks, I miss out on a huge slice of potential gains. Diversification across geographies also protects me from domestic recessions, currency fluctuations, and sector-specific risks. International mutual funds help manage this exposure, but what makes them especially valuable is the mix of multinational companies they often include. These firms have strong earnings, wide market access, and strategic dominance.
How Funds Choose International Holdings
Most fund managers use a combination of macroeconomic indicators, company fundamentals, regional opportunities, and sector trends. From my experience, common metrics they use include forward earnings growth, debt-to-equity ratios, dividend payout consistency, and price-to-book values. When a stock checks most of these boxes and adds geographic balance, it earns a place in an international fund’s portfolio. These three companies often meet that threshold and are worth understanding in detail.
1. Nestlé S.A. (NSRGY) – Based in Switzerland
Nestlé is a household name globally and one of the largest food and beverage companies. I’ve found that many international stock mutual funds hold Nestlé because of its stability, dividends, and global brand power. Headquartered in Vevey, Switzerland, the company operates in over 180 countries with a diversified product base spanning baby formula, bottled water, pet food, coffee, and snacks.
From a financial standpoint, Nestlé’s consistency impresses me. As of 2024, it had an operating margin of around 17% and a return on equity near 25%. Many funds, such as the Vanguard International Growth Fund (VWIGX) and Fidelity International Capital Appreciation Fund (FIVFX), hold Nestlé as a top-ten position.
Let me walk you through a simple return scenario. Assume a fund invests $5 million in Nestlé stock at a price of $120 per share. After one year, the stock rises to $132 and pays a dividend of $2.50 per share. Here’s the return:
Capital Gain = \frac{132 - 120}{120} = 0.10 = 10%
Dividend Yield = \frac{2.50}{120} = 0.0208 = 2.08%
Total Return = 10% + 2.08% = 12.08%
That’s the kind of predictable, moderate growth that gives international funds stability.
2. Taiwan Semiconductor Manufacturing Company (TSMC) – Based in Taiwan
In the tech-heavy global economy, semiconductor firms are essential. TSMC leads the world in chip fabrication and manufactures chips for companies like Apple, Nvidia, and Qualcomm. I’ve seen TSMC held in nearly every tech-oriented or diversified international fund I’ve analyzed. Its scale and technological edge make it an anchor for global portfolios.
One thing I admire about TSMC is its capital discipline. Despite the massive capital expenditure needed in the chip industry, its free cash flow remains strong. In 2023, it reported over $35 billion in net income with an EBITDA margin of over 65%. It also holds over $40 billion in cash, which cushions it against downturns.
TSMC is a core holding in the American Funds EuroPacific Growth Fund (AEPGX) and iShares International Growth Fund (IGRO). Here’s a quick illustration of how TSMC drives fund returns.
Suppose a fund buys 100,000 shares at $90 per share. A year later, the price is $115. It also distributes a dividend of $3 per share.
Capital Gain = \frac{115 - 90}{90} = 0.2777 = 27.78%
Dividend Yield = \frac{3}{90} = 3.33%
Total Return = 27.78% + 3.33% = 31.11%
This level of return not only boosts fund performance but also increases fund inflows from investors who chase results.
3. ASML Holding N.V. – Based in the Netherlands
ASML is another cornerstone of the semiconductor industry, but its role is different from TSMC’s. It supplies the extreme ultraviolet lithography (EUV) machines needed to manufacture cutting-edge chips. With fewer than a handful of global competitors, ASML has created a monopoly-like position.
International stock funds love ASML for its high-margin business and barrier to entry. The cost of each EUV machine exceeds $150 million, and clients often have to wait in line to receive theirs. This creates both financial predictability and operating leverage.
Funds like the Invesco International Growth Fund (AIIEX) and Artisan International Fund (ARTIX) allocate significant weight to ASML. Let’s look at a scenario:
Say a fund invests $10 million into ASML when the stock trades at $750 per share. Over 12 months, the price rises to $875, and it pays out $6 per share in dividends.
Capital Gain = \frac{875 - 750}{750} = 16.67%
Dividend Yield = \frac{6}{750} = 0.8%
Total Return = 16.67% + 0.8% = 17.47%
Even in volatile markets, a company like ASML offers quality and innovation that makes it valuable in any international strategy.
Comparison Table
| Company | Country | Sector | Funds Holding It | Recent Total Return | Dividend Yield |
|---|---|---|---|---|---|
| Nestlé (NSRGY) | Switzerland | Consumer Staples | VWIGX, FIVFX | 12.08% | 2.08% |
| TSMC (TSM) | Taiwan | Semiconductors | AEPGX, IGRO | 31.11% | 3.33% |
| ASML (ASML) | Netherlands | Semiconductor Equip | AIIEX, ARTIX | 17.47% | 0.8% |
What These Holdings Tell Me
I noticed that despite being international, these companies share some core traits. They each have strong balance sheets, recurring revenue, strategic global demand, and pricing power. Mutual fund managers love these qualities because they reduce volatility and improve long-term compound returns.
As someone who invests with a long horizon, I value companies that hold their ground through inflation, war, supply shocks, and monetary policy shifts. Each of these firms has done exactly that.
Risk Perspective
Though these companies are popular among mutual funds, they aren’t risk-free. I’ve learned to consider the following:
- Currency Risk: If the U.S. dollar strengthens, foreign earnings may lose value in dollar terms
- Political Risk: Taiwan’s geopolitical uncertainty can affect TSMC
- Regulatory Risk: Europe’s evolving antitrust and tax laws can impact ASML and Nestlé
- Supply Chain Risk: Both ASML and TSMC depend on complex supply chains that are sensitive to geopolitical disruptions
That said, most mutual funds hedge or diversify against these risks through weighting and regional balancing.
Final Thoughts
When I evaluate international stock mutual funds, I always look beyond the performance charts and expense ratios. I study what companies the fund owns and why. Nestlé, TSMC, and ASML keep showing up because they’re financially resilient, globally relevant, and structurally advantaged. Their presence often signals strong research behind the fund’s construction. I consider their repeated appearance a green flag for long-term stability and above-average returns in an international context.
If you’re holding or considering international mutual funds, I recommend checking the fund’s top ten holdings. If these three names appear, there’s a good chance the fund is anchored by world-class assets that deserve a place in your portfolio too.
