American Depository Receipts

The ADR is a U.S. listed security that mirrors a foreign-listed security. There may be legal reasons that the actual stock cannot be listed for trading in the U.S. market, but this factor should not concern you. If the underlying corporation is of high quality and its share price represents a good value to you, then don't hesitate to buy the stock.  The big industry player in the ADR market has long been the Bank of New York. For a virtual smorgasbord of investor information and tools, I highly recommend the BNY ADR web site: Perhaps the best source of information I have found on ADRs comes from JP Morgan. It's a terrific free service, but you have to click to agree to their terms of use (please do):

JP Morgan has a particularly good daily review of foreign markets, which you can access prior to the market open in North America. They also have the most extensive web-based research on U.S.-listed foreign issues (mostly ADRs) that I have found.  Under the tab called ADR Universe, you can analyze ADRs by region, by country and by industry sector. When you have located a target, you can immediately call up a plethora of investment data.  With a single click, you can even have this service provide you the list by cross-listed market, e.g., if you wish to confine your search to NYSE, Nasdaq or AMEX listed stocks.  With another click, you will see a listing of the major institutional investors and mutual fund investors and their holdings. In fact there is such an extent of information, I give this web site a 5-star rating.  Although many people look at the ADR market as a special situation, I see it a different way. Moreover, I use the JP Morgan service as a research tool. Believe me, you too will find this web site to be invaluable when seeking out internationally listed securities that are commonly affected by changes in global interest rates, commodity prices and economic factors.

The airline industry is an excellent example.  You know that I say that investing is a marketing game. Wall Street and its counterparts across the globe like to keep their stories straight " for maximum impact. Stocks in industry groups tend to move up and down in tandem because analysts and money managers like to follow one another.  Maybe its safety in numbers, who knows? But, it is clearly people acting in concert.

One other thing: an ADR might not trade in a 1 to 1 ratio with the underlying stock. It could be that the ADR represents 10 shares or 100 shares or half a share, and so forth.  You have to check. Otherwise you'll be confused when seeing an entirely different price in the foreign market, even after adjusting for foreign exchange.  If you are looking to invest in a well-diversified fund where political risk is clearly a factor, why not consider the BLDRS Emerging Markets 50 ADR Index Fund (Nasdaq: ADRE)?  Presently in 1Q05, the ADRE ETF might be a little over-priced; however, there is going to be a time in the future when this particular ADR is appropriate for any investor who seeks a globally diversified portfolio.

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