There are strong underlying reasons for the success of global growth investing. First, there is a sort of value bias among most global investors, leaving growth stocks less examined and researched. As a result, when the investment community finally discovers one of these gems, it tends to rocket in price. Usually our methods have already gotten us into the stock before this happens and we get to go along for the ride. We search for global stocks using the same eight tried-and-true fundamental variables and quantitative measurements that we use on U.S. stocks and it works amazingly well, uncovering even better buying opportunities.

Part of the reason for the strong performance of non-U.S. stocks is that money has been pouring into international investments. It is not that money is necessarily flowing away from the United States; it is just flowing to other places much faster. International funds have been collecting far more dollars than U.S. funds, and the strong money flow has created buying pressure in good stocks, which gives us alpha, exactly what we are looking for. According to the Investment Company Institute (ICI), there is now almost as much money in international stock funds as there is in U.S.-only funds. In fact, non-U.S. funds have outsold domestic U.S. investment mutual funds by almost 4 to 1 between 2003 and 2006. The strong flows into non-U.S. markets and stocks is a relatively new phenomenon that shows little sign of abating, especially given that many non-U.S. stocks are riding a free currency tailwind from a weak U.S. dollar.

Exchange-traded funds (ETFs) are another important new development in the fund world. Traded on exchanges and offering substantial liquidity and cost advantages over traditional funds, ETFs are a fast growing source of investment cash. The international segment also dominates this area with much more cash flowing into international ETFs than U.S. indexes.

There are several reasons for this cash flow change. One of the more obvious is that investors like to diversify their holdings. Most financial advisers today suggest that their clients have some exposure to non-U .5. assets. In a smaller, more accessible world it makes sense for investors to go wherever opportunity presents itself.

Another significant reason for the money flow into non-U.S. markets and stocks is the Sarbanes-Oxley Act. Sarbanes-Oxley has led to a reduction of the number of international companies that want to list in the United States in the form of an ADR share (the media have reported extensively on the issue). With fewer ADR shares available and more money pouring into international stocks than ever before, the remaining ADR shares have soared in recent years. Ironically, Sarbanes-Oxley has effectively helped to reduce the number of ADR shares and artificially boosted the remaining ADR stocks. Sarbanes-Oxley tightened the reporting standards for companies listed in the United States and compels chief executives to sign and personally vouch for their accounting reports and releases. Many non-U.S. companies have not been interested in being this exposed to the U.S. legal system. They are well aware that the United States is the world's most litigious society and they simply have no interest in being exposed to it. As a result, many have left U.S. markets and many that might have listed their shares in the United States no longer bother. Both Hong Kong and Shanghai did more IPOs than the U.S. markets did in 2006, even though the NYSE led the world in new IPOs just five years ago, before Sarbanes-Oxley was passed. As the pool of international ADRs has shrunk in the United States, the money has followed the new names to exchanges in London, Hong Kong, and Shanghai.

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