For several reasons, now is a very good time to buy the best-emerging markets stocks. First of all, the current strength of the dollar increases the profits of foreign companies that sell their products, directly or indirectly, to American consumers and/or companies.
Secondly, many companies in emerging markets are benefiting from the energy transition, the rise of electric vehicles, and other, ongoing solid trends.
Also worth noting is that, with supply chains improving and signs of inflation easing in America, hyperinflation is becoming less of a threat for the best-emerging markets’ stocks. Those equities, like most stocks around the world, should benefit significantly from investors’ recently increased optimism about the U.S. economy.
Finally, I believe that a permanent, compelling feature of emerging-market names is that it’s much easier to find relatively undiscovered, “diamond-in-the-rough” stocks when you incorporate emerging markets into your search.
| VALE | Vale | $14.17 |
| BIDU | Baidu | $142.72 |
| BYDDF | BYD | $37.05 |
| SQM | Sociedad Quimica y Minera de Chile | $100.79 |
| JKS | JinkoSolar | $68.15 |
| PBR | Petróleo Brasileiro S.A. – Petrobras | $15.46 |
| TTM | Tata Motors | $29.98 |
Best Emerging Markets Stocks: Vale (VALE)
A Brazil-based mining company, Vale (NYSE:VALE) is very well-positioned to benefit from the coming rebound of the U.S. and Chinese economies, the EV revolution, the recovery of automobile supply chains, and the strong demand for solar panels and wind turbines.
Vale generates most of its revenue from iron ore, which, of course, is used to make steel. The recovery of auto supply chains should lead to the construction of more vehicles, while pent-up demand for air travel is likely to increase the demand for new planes significantly. Both of those trends should greatly increase the demand for steel and, consequently, meaningfully lift Vale’s iron ore sales.
The company also produces copper, which is used in EV batteries, solar panels, and wind turbines. Finally, the company sells nickel, which is also used to make EV batteries.
Despite all of these positive catalysts, the forward price-earnings ratio of VALE stock is a measly 3.5.
Baidu (BIDU)
Baidu (NASDAQ:BIDU), a Chinese search engine and tech giant, was never one of the main targets of the country’s regulators during the tech crackdown. And Beijing appears to be putting the brakes on that initiative, for now at least.
What’s more, China’s anti-coronavirus measures are also being relaxed, and the country is looking to use “effective investment” to boost its economy.
“The second-largest search engine globally,” Baidu is becoming the world’s leading robotaxi operator. The company’s robotaxi business in China is operating in “10 cities and [has completed] over 500,000 rides across three quarters.”
Seeking Alpha contributor Mobility Matters Research recently estimated that, “by 2030,” the business could generate $1.6B in annual revenue. ”
Eventually, Baidu could bring its robotaxi business to many other countries. However, the forward price-earnings ratio of BIDU stock is slightly under 20. That’s a very attractive valuation, given its powerful search engine and its leadership in the robotaxi sector.
Best Emerging Markets Stocks: BYD (BYDDF)
Business is booming for BYD (OTCMKTS:BYDDF), which Investor’s Business Daily recently called “the biggest Chinese EV maker, [and] arguably the biggest EV maker in the world.”
In July, the company’s EV sales soared 222% year-over-year, reaching a record 162,350. And its Q2 sales growth was also extremely impressive. Last quarter, its unit sales jumped an incredible 256% YOY and 24% versus Q1 to 355,000. BYD sold 100,000 more EVs than Tesla (NASDAQ:TSLA) in Q1, and Warren Buffet’s Berkshire Hathaway (NYSE:BRK.B) has a 7.7% stake in BYD.
The Chinese company is looking to expand its EV business to many more countries, and it also has a large EV battery business, enabling it to benefit from the EV boom in more ways than one.
Sociedad Quimica y Minera de Chile (SQM)
As another InvestorPlace columnist, Alex Sirois, recently pointed out, Sociedad Quimica y Minera de Chile (NYSE:SQM) “is rapidly growing and improving” as its Q1 revenue came in at $2.02 billion “up from $528.5 million a year prior.”
Sirois noted that: “Lithium sales accounted for $1.45 billion of its revenue” in Q1, so Sociedad is as much of a pure play on lithium as you’ll find. Of course, given the rapid acceleration of the EV revolution, the demand for lithium is poised to remain incredibly strong for the foreseeable future.
What’s more, the lithium miner is very profitable, as its Q1 net income came in at a very impressive $796 million in Q1, while its EBITDA margin, excluding certain items, was nearly 59%. SQM’s Q1 results “reflect… the impact of higher prices in all our business lines, where significant increases in lithium prices stand out,” said CEO Ricardo Ramos in a statement included in its Q1 earnings press release.
In 2021, Sociedad generated $973 million of operating income, up from $375 in 2020 and $442 million in 2019.
Best Emerging Markets Stocks: JinkoSolar (JKS)
The reaction of JinkoSolar’s (NASDAQ:JKS) stock to the passing of the Democrats’ budget bill has been more subdued than that of many other names in the sector.
It appears that investors are worried that the company will be hurt by the generous manufacturing tax credits in the bill that will be restricted to firms with U.S.-based plants.
But China-based Jinko has a large plant in Florida that it can easily expand. And as one of the largest solar panel makers in the world, Jinko is poised to benefit from tremendous demand for solar energy in many other regions, including India, the EU, and, of course, China.
Also worth noting is that the price of all of the panels that Jinko sells in the U.S. will be reduced because of the extension of the investment tax credit for solar within the budget. Additionally, Jinko makes some of the most efficient solar modules in the industry, enabling it to easily prevail against companies offering cheaper panels.
Petróleo Brasileiro S.A. – Petrobras (PBR)
A huge, Brazil-based oil company, Petrobras (NYSE:PBR) reported very strong Q1 results, as its free cash flow jumped 61% to a very high $12.8 billion. For the year, analysts, on average, predict that the oil company’s profit will surge 74% YOY.
PBR stock recently received a nearly perfect composite score of 99 from Investor’s Business Daily, and the shares have an incredibly high forward dividend yield of nearly 45%.
Although oil prices could easily continue dropping going forward due to a variety of factors, including the EV revolution and a possible cease-fire in Ukraine, the stock’s tiny forward price-earnings ratio of 3.4, along with, its huge dividend yield, more than offset any possible declines in oil prices.
Best Emerging Markets Stocks: Tata Motors (TTM)
The India-based automaker’s fledgling EV business is starting to take off. Indeed, Tata (NYSE:TTM) plans to sell roughly 50,000 EVs during its current fiscal year and 100,000 in the subsequent fiscal year.
The automaker’s supply chain situation is improving, boosting its overall financial results. In Tata’s fiscal Q1 of 2023, which ended in June, its commercial vehicle and passenger vehicle revenue both more than doubled versus the same period a year earlier.
Its overall revenue climbed 8% YOY to $9 billion, while its EBITDA margin jumped two percentage points YOY to 6.1%.
“The CV industry continued to witness rising demand across all segments led by a reviving economy. With the sequential easing of semiconductor shortage and our ramp-up agility, Tata Motors delivered a strong quarter,” said the company’s executive director, Girish Wagh.
On the date of publication, Larry Ramer held a long position in JKS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.