These stocks are the best for emerging markets.
Emerging market stocks lagged the S&P 500 index in 2019 thanks in large part to fears surrounding the trade war between the U.S. and China. But many emerging market investors see China, India, Brazil and other emerging economies as opportunities for long-term growth. Emerging markets are in countries with low per capita income, and are popular for investors for their growth potential in the global market. Recent weakness in emerging market stocks could be a buying opportunity, especially in China. Despite trade war headwinds, China is projecting 5.8% GDP growth in 2020 for its economy of more than 1.3 billion people. Here are 12 of the best emerging market stocks to buy today.
Alibaba Group Holding (ticker: BABA)
Alibaba is an e-commerce and cloud services leader in China and the parent company of Taobao, TMall, Ele.Me and other platforms. Alibaba’s massive $521 billion market cap makes it one of the largest public companies in the world. But CFRA analyst John Freeman is still projecting 32% compound annual revenue growth through fiscal 2022 and says cloud services will help boost margins. Alibaba recently made new 52-week highs after an initial public offering in Hong Kong, which granted Chinese investors their first opportunity to invest. CFRA has a “buy” rating and $220 price target for BABA stock.
Naspers Limited (ADR) (NPSNY)
This South African holding company embodies the Wall Street saying, “You only have to be right once.” In 2001, the outfit invested $32 million in Tencent, an investment that – even after some gradual selling – is worth about $120 billion today. Not bad. China’s Tencent, one of the most valuable companies in the world, is about 31% owned by Naspers. Fortunately for keen investors, Naspers’ current market value is about $61 billion. The discrepancy is partially because the company’s other investments haven’t been as successful. But China’s thriving online gaming company, which also owns properties like WeChat and a ride-hailing service, should be good enough.
Mobile TeleSystems (MBT)
Alibaba and Tencent are both Chinese tech giants with expansive global ambitions and bigger valuations than most public companies. But the best emerging markets stocks aren’t all from China. Mobile TeleSystems, a telecommunications and wireless company, hails from Russia. As is typical of telecoms, MBT is a slow and steady grower, rewarding shareholders with a nice dividend. In fact, “nice” is an understatement: Mobile TeleSystems yields 9.6%, in addition to trading for 8.7 times forward earnings. MBT is a fine foreign stock to buy for the long term, just keep in mind fluctuations in the ruble and geopolitical tensions can weigh on its shares.
Telkom Indonesia (TLK)
Forget Russia and China for a second. Since 1960, Indonesia’s population has tripled to 264 million people, growing about three times as fast as the U.S. population. Indonesia’s growth domestic product at 5% is also impressive. TLK, the country’s premier wireless giant, should continue to benefit from these secular macroeconomic tailwinds. Shares trade for 22 times earnings, while also boasting minimal debt and paying a 2.7% dividend. With annualized sales growth of 10% annually for the last five years, TLK, like Mobile TeleSystems, won’t blow your hair back with growth, but it is still an attractive stock to buy.
Taiwan Semiconductor (TSM)
Taiwan Semiconductor is the global leader in integrated circuit manufacturing. TSM shares certainly haven’t been hit by the trade war in 2019, gaining more than 43% year-to-date. But analyst Hazim Bahari says the company’s exposure to secular growth markets such as smartphones (49% of revenue), high-performance computing (29%) and internet of things (9%) create plenty of additional long-term upside for investors. Bahari says 7-nanometer chips for 5G smartphones will trigger revenue growth acceleration in 2020. CFRA has a “buy” rating and $54 price target for TSM stock.
China Mobile (CHL)
China Mobile is the world’s largest mobile operator and has a customer base of more than 800 million subscribers. Analyst Ahmad Halim says the stock’s 21% decline in 2019 pushed its enterprise multiple near 10-year lows, and the company’s focus on broadband and emerging businesses has positioned it well for the future. Like many U.S. telecoms, China Mobile also has a sizable 4.9% dividend yield, and Halim says the company has the free cash flow to boost its dividend in 2020. CFRA has a “buy” rating and $48 price target for CHL stock.
Arcos Dorados (ARCO)
Arcos Dorados is a stock U.S. investors may find themselves more comfortable with than Russian and Indonesian telcos. That’s because the Uruguayan restaurateur operates a string of familiar joints: McDonald’s Corp. (MCD). It’s a franchisee of massive proportions, with more than 2,100 Mickey D’s locations in 20 countries and territories throughout Latin America. A brand like McDonald’s is a one-of-a-kind, immensely valuable asset with international value. ARCO is seeing modest growth in Brazil and Latin America.
PetroChina is the largest oil and gas company in China. Halim says PetroChina’s 26% 2019 sell-off is a buying opportunity given the stock is trading at less than half his 2020 projected book value per share. Halim is projecting 3% revenue growth in 2020 driven by domestic gas production and overseas oil production. An unexpected rise in crude oil prices or a trade deal with the U.S. could boost margins as well. PetroChina also pays a solid 3.7% dividend yield. CFRA has a “buy” rating and $57 price target for PTR stock.
China Life Insurance (LFC)
China Life Insurance is the largest life insurance company in China, holding 20% market share. Analyst Siti Rudziah Salikin says China Life has several growth tailwinds, including a robust renewal business, a shift to a longer-term product mix and the potential for further market share gains. She is projecting 5% revenue growth in 2020 thanks to at least an 8% increase in premiums. Improvements in operational efficiency should also help stimulate further earnings growth as well, she says. CFRA has a “buy” rating and $17 price target for LFC stock.
CNOOC is a Chinese oil exploration and production company that generates 60% of its production from offshore rigs in China. Halim says CNOOC can offset lower crude oil prices via cost controls and production growth. CNOOC has a strong pipeline of projects through at least 2021, and Halim says the company has higher margins than its peer group average. It also has a healthier balance sheet, although its state-owned status creates a bit of uncertainty for U.S. investors. CEO stock pays a 5.7% dividend, and CFRA has a “strong buy” rating and $179 price target.
Baidu is the leading internet search engine in China. After a 27% 2019 sell-off, Freeman says Baidu shares trade at an attractive valuation given its dominant market share of Chinese search and its emerging cloud services business. Baidu is currently trading at a 75% discount to its five-year trailing price-tangible book value average. Freeman projects three-year compound annual revenue growth of 11% and says operating margins should expand from 13% to 20% by the end of 2020. CFRA has a “strong buy” rating and $174 price target for BIDU stock.
A diversified energy provider, Cosan is one of the biggest companies in Brazil and is poised to benefit as the scandal-plagued South American country recovers. GDP growth looks like it’s returning following an extended contraction caused by the commodities slump that began in 2014. CZZ, which fell below $3 a share in 2016, has rallied above $19 and are approaching its peak price in 2013. The company sells natural gas, lubricants, fuels and sugarcane ethanol. If you’re a commodities buff and think prices are on the upswing, CZZ, which trades at 12 times forward earnings, is one of the best emerging markets stocks to buy.
The best emerging markets stocks to buy for 2020.
Alibaba Group Holding (BABA)Naspers Limited (ADR) (NPSNY)Mobile TeleSystems (MBT)Telkom Indonesia (TLK)Taiwan Semiconductor (TSM)China Mobile (CHL)Arcos Dorados (ARCO)PetroChina (PTR)China Life Insurance (LFC)CNOOC (CEO)Baidu (BIDU)Cosan Ltd (USA) (CZZ)