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5 Strong Emerging Market Stocks
The U.S. stock market has put together an impressive rally over the last couple of months, but they continue to lag many of the emerging market countries in performance. Investors should have a certain amount of exposure to emerging markets either through exchange traded funds (ETFs) or individual stocks.
When sifting through the large number of emerging market stocks that are doing well this year, a few caught my eye as potential winners in the months ahead. The five stocks at the top of the list are highlighted below.
Grupo Financiero Galicia (Nasdaq:GGAL) is an Argentina-based bank that offers traditional banking services as well as more complicated financial services. The stock is up over 100% in 2010 and recently hit the best level since 2001. The bank has a market capitalization of only $1.5 billion, which is small when compared to the largest banks in the region. Fundamentally the stock trades with a P/E ratio of 29.9, but the forward P/E falls to 14.1, making the stock attractive on a pullback to the $10 to $11 area.
Staying in Latin America and turning to a company that is linked to a commodity that has more than doubled in the last six months takes us to Cosan Limited (NYSE:CZZ). The company engages in the production and sale of sugar and ethanol products. With the output of sugar from Brazil, where CZZ is based, the price of the commodity has skyrocketed and this should help the company even though production may be down. The demand for sugar remains strong because of its use as a sweetener and a fuel by the way of ethanol. Fundamentally the stock is attractive with a P/E ratio of 10.3 based on 2010 earnings and 6.4 based on the First Call 2011 estimates.
Off to India
Half way around the world is the large Indian automotive company, Tata Motors (NYSE:TTM). The company manufactures both passenger and commercial autos that include small cars, trucks, and even busses. The stock has made a big run this year, but with a forward P/E ratio of only 9.8 it is not conceivable to see much more upside for the stock. The stock also pays a dividend of 1.1%.
A stock that has not had a big run similar to the first three stocks is Longtop Financial Technologies (NYSE:LFT). The company designs and sells software solutions to the financial sector in China. It targets everything from customer management to credit card operations. Fundamentally the company is a growth story, but also a value if you consider the forward P/E is only 19.7. The company is aggressive, but it has the numbers to back it up.
A Lesser Known Nation
Let's take a look at a lesser known nation, the Philippines. Philippine Long Distance Telephone (NYSE:PHI) provides telecom products and services in its home country. The stock recently hit a multi-year high; however its big draw for investors is the current dividend yield of 5.6%. Fundamentally, the stock is also attractive with a forward P/E ratio of 12.3. Of course the company is aggressive because of its exposure to a region that could be considered less than stable at time. That being said, it is an $11.9 billion company that has been around for decades.
The Bottom Line
When investing in an individual stock in the United States or abroad it carries a certain amount of risk. The consensus is that the risk is higher for emerging market stocks and in some cases that is true. However, the risk is often overblown and therefore opportunities arise. (For more, see Re-evaluating Emerging Markets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
When sifting through the large number of emerging market stocks that are doing well this year, a few caught my eye as potential winners in the months ahead. The five stocks at the top of the list are highlighted below.
Grupo Financiero Galicia (Nasdaq:GGAL) is an Argentina-based bank that offers traditional banking services as well as more complicated financial services. The stock is up over 100% in 2010 and recently hit the best level since 2001. The bank has a market capitalization of only $1.5 billion, which is small when compared to the largest banks in the region. Fundamentally the stock trades with a P/E ratio of 29.9, but the forward P/E falls to 14.1, making the stock attractive on a pullback to the $10 to $11 area.
Staying in Latin America and turning to a company that is linked to a commodity that has more than doubled in the last six months takes us to Cosan Limited (NYSE:CZZ). The company engages in the production and sale of sugar and ethanol products. With the output of sugar from Brazil, where CZZ is based, the price of the commodity has skyrocketed and this should help the company even though production may be down. The demand for sugar remains strong because of its use as a sweetener and a fuel by the way of ethanol. Fundamentally the stock is attractive with a P/E ratio of 10.3 based on 2010 earnings and 6.4 based on the First Call 2011 estimates.
Half way around the world is the large Indian automotive company, Tata Motors (NYSE:TTM). The company manufactures both passenger and commercial autos that include small cars, trucks, and even busses. The stock has made a big run this year, but with a forward P/E ratio of only 9.8 it is not conceivable to see much more upside for the stock. The stock also pays a dividend of 1.1%.
A stock that has not had a big run similar to the first three stocks is Longtop Financial Technologies (NYSE:LFT). The company designs and sells software solutions to the financial sector in China. It targets everything from customer management to credit card operations. Fundamentally the company is a growth story, but also a value if you consider the forward P/E is only 19.7. The company is aggressive, but it has the numbers to back it up.
A Lesser Known Nation
Let's take a look at a lesser known nation, the Philippines. Philippine Long Distance Telephone (NYSE:PHI) provides telecom products and services in its home country. The stock recently hit a multi-year high; however its big draw for investors is the current dividend yield of 5.6%. Fundamentally, the stock is also attractive with a forward P/E ratio of 12.3. Of course the company is aggressive because of its exposure to a region that could be considered less than stable at time. That being said, it is an $11.9 billion company that has been around for decades.
The Bottom Line
When investing in an individual stock in the United States or abroad it carries a certain amount of risk. The consensus is that the risk is higher for emerging market stocks and in some cases that is true. However, the risk is often overblown and therefore opportunities arise. (For more, see Re-evaluating Emerging Markets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Matthew McCall
Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.
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