No. of Recommendations: 11
I've held stock in Japanese companies for over a decade (been adding more over the past couple of years). I also own shares of other countries coincidently valued in Swiss francs, Australian dollars and Euros.
I fully understand Jim's multi-currency approach to "Atlantic" valuation. On the other hand, all the various flavors of shares I own ultimately get rationalized into US dollars at the bottom of my spread sheet.
Frankly the choice is arbitrary - as long as the currencies are not hedged.
In theory (sometimes practice can deviate as there is occasionally arbitrage opportunity on the shares of a company, but let's keep it simple) multinational companies tend to take their global sales and rationalize the profits into their native currency. This then reflects a stock price which is (should be, at least) translated into ADR (or equivalent) prices on foreign markets. As long as foreign currency holdings are not involved (say dividends are used to buy more shares), the currency shares are held in shouldn't matter at all.
I specifically keep the shares in terms of foreign currencies, not to make incremental profit on the shares (in theory, there shouldn't be any once their value is translated into greenbacks), but rather to have a diversified currency holding in case the USD suffers some catastrophic trauma not reflected in other currencies.
Using a "hedge" to minimize the effects of foreign currency fluctuations against the dollar not only doesn't necessarily help profitability, but destroys any protection currency diversification might offer.
Jeff
