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Saving and investing: overseas stocks to make you rich

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Sarah Ketterer isn't afraid to go against the grain. As manager of Causeway International Value fund, she favors companies that are attractively priced because of temporary difficulties, and she will take large positions in a country or sector if the fund's strict stock-picking regimen determines that's where the values are.

With a $5 billion portfolio of large-company stocks, the fund seemingly has lots of room to grow. Yet Ketterer closed it to new investors to retain the flexibility to move back into mid-size companies. Investors who got in before the doors were locked have been rewarded with a 17 percent annualized return over the past five years, which was achieved with relatively low volatility.

One of Ketterer's top picks, Sanofi-Aventis (symbol SNY), illustrates how she achieves those low-risk returns. Shares of the Paris-based drug giant have fallen about 9 percent since July 2006 because of concerns about generic competition and delays in the launch of its anti-obesity product, Acomplia.

But a rich pipeline of 65 potential drugs should ensure strong earnings growth in coming years. Meanwhile, says Ketterer, the company should generate a staggering $55 billion in free cash flow (cash left over after paying bills and reinvesting in the business) over the next five years, which should support the share price, recently $46. The company could use the cash to repurchase shares and to bolster its dividend. "The downside is practically nil, barring the unexpected," Ketterer says.

A somewhat riskier pick is Ericsson (ERIC), which built the infrastructure that handles 40 percent of the world's mobile-phone calls. The Swedish telecom-equipment giant should benefit from strong expected growth in mobile traffic over the next few years. But it operates in an inherently volatile business, and the declining value of the dollar hurts profits earned in the U.S. and in Asian countries with currencies pegged to the greenback. Still, says Ketterer, "the stock is too undervalued to ignore." The shares, at $38, could return 15 percent to 20 percent annually over the next couple of years, she says.

HSBC (HBC), the London-based banking giant, has taken its lumps from a subsidiary involved in the foundering U.S. subprime-mortgage business. But with a price-earnings ratio of 13, says Ketterer, it's "quite a bargain for a company that operates globally and with a strong Asia business that is expected to produce earnings growth of 20 percent to 30 percent a year." What's more, she adds, the bank is overcapitalized, meaning there's plenty of cash available for paying dividends and buying back stock. Shares recently traded for $93, with a generous yield of 4.3 percent.