When you join Pat McKeough’s Inner Circle, you get to address investment questions directly to me and my research associates; AND you get to see all other members’ questions, and our answers (of course, we eliminate any personal information).

Plus, you get all 4 of my investment advisories, including Wall Street Stock Forecaster, our newsletter that covers the U.S. markets. (See below for more on one of the global stock market investments we cover in Wall Street Stock Forecaster. The stock has risen over 57% in the past year — and we think it could go even higher.)

So you can get a sense of how the service works, I’d like to share a recent question from an investor who is interested in global stock market investing through American Depositary Receipts (ADRs).

Q: Pat: Would you please explain what an “American Depositary Receipt” is?

A: An American Depositary Receipt, or ADR, is a certificate that represents a foreign stock that trades in the U.S. Banks and brokerage firms in the U.S. issue or sponsor ADRs, and investors buy and sell them on U.S. stock markets, just like regular stocks.

One ADR may represent one or more shares of the foreign stock. But if the stock is expensive, the ADR may represent a fraction of a share. That way, the ADR will start trading at a moderate price, or be in range of similar stocks on the exchange where it trades. The price of an ADR usually stays close to the price of the foreign stock in its home market.

Foreign firms benefit from ADRs in a number of ways: They let these companies offer dollar-denominated shares and raise capital in the U.S. Issuing ADRs also raises a non-U.S. firm’s liquidity and visibility, in the United States and around the world.

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ADRs make global stock market investing much easier and safer for individual investors. The foreign company must provide detailed financial information to U.S. regulators, and to the sponsor bank or broker. Since ADRs trade on U.S. stock market, you don’t have to worry about exchange rates, foreign stock-exchange rules, or language barriers.

Price information is readily available, and transaction costs are lower. Trades will clear and settle in U.S. dollars. As well, the depositary bank or broker will convert any dividends or other cash payments into U.S. dollars before it sends them on to you.

Philips: a broad-based electronics manufacturer that trades as a New York ADR

We cover a number of stocks that trade as ADRs in our Wall Street Stock Forecaster newsletter. Among these global stock market investments is Netherlands-based Philips Electronics (symbol PHG on New York).

Philips gets 40% of its revenue by making consumer electronics, such as television sets and DVD players. It also makes health-care products, such as X-ray and magnetic-resonance scanners (35% of revenue), and lighting products (25%).

Thanks to the improving global economy, all of Philips’ businesses are starting to see rising demand. In particular, Philips expects strong sales of lights that use light-emitting diodes (LEDs) in 2010. These lights use 80% less electricity than regular light bulbs, and last much longer. That’s why developing countries like India are turning to LED lights to cut their power use.

President Obama’s health-care plan imposes new fees on medical-device makers. That will make Philips’ medical equipment more expensive in the U.S. However, demand for these products should rise as the population ages and the formerly uninsured take advantage of the new medical benefits.

If you have investment-related questions, or if you’d like to ask me about stocks you’re considering buying (or selling), you should join my Inner Circle service. Click here to learn more.