Similar to how one should diversify an investment portfolio across a number of different asset classes, investors should remember to spread a portion of their assets on an international scale. Doing so will provide some additional benefits against periodic volatility in the U.S. stock market. One of the best performing class of countries are a group of emerging economies known as the BRIC countries.
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Brazil, Russia, India and China (Collectively known as the BRIC countries) are the fastest growing emerging economies. The rate of growth in which the BRIC countries have exhibited over the last few years have had economists predicting, within the next 40 years or so, each of these four countries will be able to achieve economic superpower status. Due to possessing the desire to catch up with the developed economies of the world and the benefits of having abundant resources and/or factors of production, many of these countries have produced many very successful companies that have yielded extraordinary returns for their investors. (Pioneering is never easy, but it has its exciting - and worthwhile - moments for investors, read Forging Frontier Markets.)
There are whispers that Indonesia might deserve to be on this list (perhaps "BRIIC"), but we'll stick with the four for now. Here are eight BRIC stocks you may want to take a look at.
BRIC Stocks To Know
|China Mobile Ltd. (NYSE:CHL)||$192 billion|
|China Unicom (NYSE:CHU)||$31 billion|
Gazprom OAO (OTC:OGZPY)
|Mobile TeleSystems OJSC (NYSE:MBT)||$13 billion|
|Petroleo Brasileiro (NYSE:PBR)||$167 billion|
|Mahindra Satyam (NYSE:SAY)||$1 billion|
|Tata Motors Limited (NYSE:TTM)||$4 billion|
|Vale S.A. (NYSE:VALE)||$90 billion|
|Data as of market close June 23, 2009|
Half of the list are telecommunications companies: China Mobile, China Unicom, Mobile Telesystems and Mahindra Satyam (previously known as Satyam Computer Services).
Satyam has seen some restructuring in the last month. It will now be known as Mahindra Satyam, after Tech Mahindra Limited was allowed to purchase an additional 20% stake earlier in June. On June 23, 2009 it announced the appointment of a new CEO (Sanjay Kalra) for Tech Mahindra. It also announced a new CEO (C.P. Gurnani) and CFO (S. Durgashankar) for Mahindra Sayman. Satyam's previous chairman and founder B. Ramalinga Raju confessed to manipulating the accounting numbers earlier in the year.
Since the initial drop earlier in the year, SAY is up almost 150%. Tech Mahindra obviously sees the value in SAY, and the huge discount is reflecting a management team which no longer exists, and earnings which have been delayed. Trust should eventually be rebuilt, and this huge strategic move could make it happen faster. When earnings come out, they might not be stellar, but it could provide an even lower entry point for long-term buyers.
The Bottom Line
Not all stocks based in emerging economies are sure-fire winners, though. Similar to bubble-like conditions, low quality investments can be bid up and propelled into popularity by excessively eager investors. So it is important to do your own research and due diligence on any emerging economy stock. That said, an investor does not have to venture very far to get exposure for stocks from these countries, as many of them also trade on major North American exchanges in the form of American depository receipts. (Learn more in ADR Basics: What Is An ADR?)