NEW YORK (FORTUNE) -
Here we followed John Templeton's advice to hunt for bargains in many markets. In countries from Japan to Mexico, we looked for stocks selling below their book values or at low P/E levels, as well as firms with accelerating earnings growth or expanding margins.
Unlike their U.S. rivals, many international pharma companies aren't suffering from a rash of patent expirations. European drugmakers AstraZeneca (Research) and Sanofi-Aventis (Research) were two of our best-performing foreign picks last year, rising 37 percent and 16 percent, respectively. We're recommending them again.
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And we're sticking with Vodafone Group (Research), despite its rocky year. As the company continues to roll out its next-generation 3G service, Clyde McGregor of the Oakmark Global fund says profits should recover. Meanwhile, Vodafone generates substantial free cash flow, which it's using to fund stock buybacks and a generous 4.8 percent yield. We still like this call.
Many countries around the globe are growing much faster than the U.S., and so are their stock markets.
Emerging markets have been hot lately, but they can suffer drastic declines, so keep most of your foreign stake in developed countries.
Search for stocks selling at low price/earnings and price/book multiples, as well as stocks with accelerating earnings and increasing margins.