Top foreign stocks for 2008

The year ahead poses challenges for the global economy - but here are some strategies that should prove fruitful.

<a href='http://money.cnn.com/quote/quote.html?symb=GSK'>GlaxoSmithKline</a>
Follow the headlines and you'll get the strong sense that GlaxoSmithKline, the world's third-largest pharmaceutical company, is itself in need of some strong medicine. The Food and Drug Administration recently required the British drug giant to include a "black box" warning label on its diabetes drug Avandia because of links to a potential increase in the risk of heart attack. With patents expiring on several key drugs, sales growth has stagnated and shares have languished, edging up just 3.4% over the past year.

So why does David Herro, manager of the Oakmark International fund, say that Glaxo has all the qualities he's looking for in a long-term value play? Because the company has a diverse business, including vaccines and consumer products. (It has also taken steps to bolster its drug pipeline, most recently buying Reliant Pharmaceuticals, which markets four cardiovascular drugs in the U.S.) GlaxoSmithKline generates strong cash flow and has boosted earnings steadily over the past five years. On top of that, the stock is out of favor: It trades for 13 times projected 2008 earnings, lower than the pharmaceutical industry average, and it offers a rich 4.1% dividend yield. "We think they represent good quality and deserve attention," Herro says. "The company has managed to grow earnings pretty substantially."
Last updated December 14 2007: 11:42 AM ET
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