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Diversification is of the utmost importance when structuring a portfolio. This concept does not only speak to the number of securities held but also the size of the companies, style of the investment (growth, value), industry and geography.

The geographic exposure is a particularly important factor, as macroeconomic issues will, to some degree, drive the prosperity of the companies owned in a portfolio. In most cases, the impact that the political and economic policies a country has is unavoidable at the individual company level, which highlights why an investor would not want all of their eggs in one country's basket. Investors need to look no further than recent events surrounding Brexit to see this. Bad policies or political strife can hold the performance of a whole portfolio back if not diversified.

It is important to make a certain distinction with geographic diversification and why it is still important even if a company sources revenues globally. The distinction involves the relationship between stock volatility and beta. Volatility is the most common reference used when investors talk about risk. In short, volatility is a measure of the degree of a stock's variation over time. Beta is a measure of the degree a stock moves relative to its benchmark. So a Canadian company with a beta of 1 would move in lockstep with the TSX.

Interestingly, a stock that was domiciled in China and benchmarked to the same country could be quite volatile while having a low or beta at par. This is to say, it would be volatile because all stocks within the country (and in turn the benchmark) are volatile, but relative to all stocks in that country, it could move to a degree on par or even lower than the market.

So why does this matter? It matters because the whole point of diversification is that certain parts of a portfolio will go up when others go down. This has two effects on most investors: 1) it smooths out the ups and downs to save the investor from psychological stress and making the wrong decisions at the wrong time, and 2) It allows an investor a chance to rebalance and take gains from an outperforming area and move them into an underperforming area.

If an investor does not have a portfolio allocated to these types of beta exposures and say, only to Canada, it becomes difficult to rebalance and weather downturns when all of Canada hits a slump. Good stock picking can still keep a portfolio profitable, but it becomes much harder in recessionary times when everything moves with the total market to some degree and studies have shown that 90 per cent of returns are from asset allocation decisions.

As globalization grows and more companies sell goods and services overseas, investors can get global exposure without leaving their home country.

While owning companies with revenues sourced from all over the world is a prudent strategy and helps mitigate some company-specific risks, it is not a silver bullet, because Canadian-domiciled companies will still move to some degree with the domestic market (as per the beta) and international companies will move to some degree similar to their domestic markets. An investor can still capture international growth from Canadian companies, but is not a panacea for geographic diversification in a portfolio.

Given that there are still benefits from owning companies with international revenues, such as less concentration from a single geographic source and the ability of a company to allocate resources to higher-growing regions, we wanted to outline a few companies that offer investors international revenues while not having to leave the Canadian markets.

Alimentation Couche-Tard Inc.

The company has been a long-term value creator for investors and has revenues well-diversified across the world. What's more, ATD continues to be aggressive with international acquisitions, adding for further growth potential in globally sourced revenues. Interestingly, ATD has pulled back from recent highs and is trading below average historical levels over the last two years.

During the oil decline, investors were concerned margins would be compressed, but the impact was offset by more volume being pumped at the gas stations. Now that oil is coming back from lows, we are hearing investors being concerned about declines in volume at the pumps – but again, margin expansion with the help of higher oil prices should help offset this impact.

Over a five-year period, ATD has had a negative correlation with oil but as long as you are not overly bullish on the prospects of oil, a lot of this impact should already be priced in from recent moves.

CCL Industries Inc.

CCL has been an effective consolidator in the packaging industry. One of the side effects of this acquisitive strategy is that CCL has gained a global footprint through which they can sell their services. We view CCL as a company that more than justifies the premium valuation it garners, as sometimes, investors simply need to "pay up" for quality.

WSP Global Inc.

Countries all over the world will need to upgrade their current infrastructure and the global platform that WSP offers will allow it to benefit from growing government spending all over the world.

With the Canada Pension Plan Investment Board owning 19 per cent of the company's shares and Caisse de dépôt et placement du Québec owning about another 18 per cent, WSP also has some substantial investor backing and support. Finally, the dividend, which is just under 4 per cent, offers investors a nice cash flow. While concerns of global growth may give some pause, WSP does deal with critical infrastructure as well, meaning that regardless of political developments, some projects will still need to be started and completed.

Exco Technologies Ltd.

Exco is a company that, while cyclical, holds all of the qualities we like: dividend growth, insider ownership, cheap valuation but strong revenue growth, and a healthy balance sheet. Exco is trading below its two- and five-year historical trading multiples, which is a signal that the stock offers long-term investors an interesting entry point.

While simply owning Canadian companies with international revenues is not a full solution to those looking for geographic portfolio diversification, it is a step in the right direction. It can also help an investor avoid issues such as dividend credit eligibility of international stocks, and compatibility with RRSP or TFSA accounts. For an investor looking to diversify internationally, we think the above companies can be a good starting point for dipping your toe in the international waters.

Ryan Modesto is managing partner with 5i Research. Purchase 5i Research Inc. – Investment Reports at The Globe and Mail Data Store