When Goldman Sachs (NYSE:GS) economist Jim O'Neil first dubbed the four nations of Brazil, Russia, India and China the BRICs back in 2001, he made one of the gutsiest long-term global macro-economic calls - that these nations would be the biggest drivers for future global growth. O'Neil's prediction has, for the most part, come true. The MSCI BRIC index has risen by more than eight times what the S&P 500 index returned during the past decade, and the BRICs' combined gross domestic product soared to $13.3 trillion last year. However, while the group's previous prowess is well known, lately it has begun to struggle. For long-term investors, now could be the best time to strike on BRIC.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Short-Term Pain, Long-Term Gains
Featuring large growing populations, rising domestic wealth and vast commodity resources, the BRICs have managed to capture the emerging market spotlight and rise to the top. Overall, the four nations are poised to be the next leaders on the world stage. So far, the BRIC bloc has lived up to that promise. That is until recently, when potential cracks began to form.

Slowing growth stemming from Europe is having its way with the four emerging superstars. As major commodities producers, both Russia and Brazil have seen their fortunes fade as energy and minerals prices have dropped. Rising budget deficits in India, along with a falling rupee has wreaked havoc on the Indian stock market. Finally, efforts to cool inflation in China may have been too much and now policy makers in Beijing are doing all they can to avert a hard landing scenario. So, it's no wonder why investors have pulled more than $6.3 billion and $5.8 billion out of Brazilian and Russian stocks and bonds, respectively, last month. Overall, the MSCI BRIC index has lost 19.7% during the past year.

However, much of the long-term growth story of the four nations continues to remain intact, and the recent downturn has made them quite attractive. According to MSCI (NYSE:MSCI), the BRICs currently can be had for an average P/E of 8.9 with a hefty dividend yield of 3.6%. That compares to 13.8 times earnings and a 2.3% dividend yield for the U.S.-based S&P 500. That could even be a bigger bargain as the nations resume their long-term growth trajectories.

SEE: Potholes In The Golden BRIC Road

Betting on the BRIC
While the four nations make the bulk of broad-based emerging market funds like the Vanguard MSCI Emerging Markets ETF (ARCA:VWO), there are ways to bet directly on the bloc's success. The easiest way is through the iShares MSCI BRIC Index (ARCA:BKF). The fund tracks 318 different BRIC-based firms including leaders like Brazil's Itau Unibanco Holding S.A. (NYSE:ITUB) and China's CNOOC (NYSE:CEO). Overall, both China and Brazil make up about 70% of the fund's holdings, with India and then Russia rounding out the group. The fund charges 0.67% in expenses and yields 2.33%. The Guggenheim BRIC ETF (ARCA:EEB) makes an ideal broad BRIC play as well.

Small-caps are often a great way to play a nation's "domestic" economy. After all, a multinational commodities giant like Vale (NYSE:VALE) sells its products all over the world. Surprisingly, there are no broad BRIC small-cap funds, but all of the nations do have individual funds that track them. Both the EGShares India Small Cap (ARCA:SCIN) and iShares MSCI China Small Cap Index (ARCA:ECNS) offer exposure to the BRICs with the largest consumer markets.

Finally, oil and natural gas producing Saudi Arabia and Russia have been hit hard by falling energy prices. However, long-term energy demand and rising crude oil and natural gas prices bode well for the energy giant. With holdings in key Russian producers like Gazprom (OTC:OGZPY) and Rosneft, the Market Vectors Russia ETF (ARCA:RSX) offers a way to play both rising energy prices and the Russian markets return. The exchange-traded fund charges 0.62% in expenses and features a 42% weighting to energy firms.

SEE: Understanding BRIC Investments

The Bottom Line
When Goldman Sachs first came up with the acronym of BRIC, the four nations were the cream of the emerging market crop. A decade of torrid growth later, the group has recently begun to stall. However, many of the same characteristics are still in place and the BRICs currently represent a value. For long-term investors, now could be the chance to add the nations to a portfolio. The previous picks, along with the SPDR S&P BRIC 40 (ARCA:BIK), make ideal ways to do just that.

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing

    5 Companies Benefiting From Germany's Record Surplus

    A weaker euro is boosting German exports, which have led to a record trade surplus. Here are five German companies reaping the benefits.
  2. Economics

    Ukraine-Russian Sanctions: The Gift That Keeps On Giving

    The repercussions of Russia's 2014 invasion of Crimea are nowhere near over. The Ukraine says Russian aircraft are no longer welcome to take off or land in Ukraine's airports.
  3. Economics

    The 9 Industries Driving Texas' Economy

    Find out which industries are driving the Texas economy. Learn about the largest and fastest growing employers and producers in Texas.
  4. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  5. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  6. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  7. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  8. Stock Analysis

    Top 5 Companies Owned by Ford

    Discover some of Ford Motor Company's most important subsidiaries and joint ventures, and learn more about what they do to further Ford's business interests.
  9. Mutual Funds & ETFs

    The Top Vanguard Emerging Market ETF

    Learn why growth investors should consider investing in VWO's portfolio of emerging market stocks.
  10. Investing

    Which Economy Is Larger - The United States or China?

    China's economy may be larger than the U.S. economy, but it all depends on which exchange rate method you use to make the GDP comparisons.
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!