Investors should generally consider ideas from markets they are most familiar with. This is a relatively obvious point. With that in mind, most Americans should focus on domestic markets for a variety of reasons, not just because they are familiar. But there are benefits to going abroad, which leads us to today’s topic: hidden gems in emerging market stocks.
Again, the core of your portfolio should theoretically be US-based. We live and work in the US and know the ins and outs of it. That being said, one of the main benefits of emerging market stocks is diversification. Even if your portfolio is geared entirely towards growth-oriented ideas, it’s beneficial to diversify away this growth. As a rule of thumb, you don’t want to put all your eggs in one basket.
But the real reason to target international markets is the underlying growth opportunities. Despite post-pandemic pressures, some regions are expanding at a faster pace than their more mature counterparts. With that in mind, here are some attractive emerging market stocks to consider.
CEMEX (CX)
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Based in Mexico, CEMEX (New York Stock Exchange:CX) is in the Building Materials industry. According to the company’s public profile, the company manufactures, sells and distributes cement, ready mixed concrete and other aggregate-based solutions for the construction services sector. Mexico is a top emerging market, experiencing relatively high growth rates despite challenging global challenges.
As the world continues to recover from COVID-19, I expect Mexico to continue to lead in terms of growth. Admittedly, recent financials have not been great. From the second quarter through the fourth quarter of 2023, the company lost earnings per share by 1 cent. But in the first quarter of 2024, earnings per share rose to 17 cents, beating analysts’ expectations of 13 cents.
Perhaps Mexico is on the upswing again. If so, CX stock is interesting. Currently, the stock is trading at 0.51x trailing year sales, but the average from Q1 2023 to Q1 2024 was 0.63x.
Even better, experts expect CEMEX’s sales to reach $18.03 billion, up 3.5% from last year, making CX one of the emerging market stocks to watch.
Himax Technologies (HIMX)
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Interestingly, if you’re interested in emerging market stocks but not in China, there are some attractive options to consider. One of them is in neighboring Taiwan, which is Himax Technologies (Nasdaq:Himkus). Himax, which operates across a broad range of semiconductors, is a fabless company that specializes in display image processing technology. Wherever TVs, monitors, laptops, and other interactive devices are concerned, HIMX stock is worth keeping an eye on.
After a gloomy start to the year, Himax is starting to turn things around. Year-to-date, Himax shares have risen 23%. Moreover, between the third and first quarters, the company posted an average EPS of nearly 9 cents, beating the analyst consensus estimate of 7 cents. Earnings surprise for the period was 36.07%.
Now, where Himax gets a bit tricky is in the valuation department. Over the past year, Himax has been trading at 1.05x prior year sales. Currently, this statistic has risen to 1.44x. Of note, the latest quarterly sales growth rate (year-over-year) is 15% below that level.
FY24 could indeed be tough, but there could be a slow recovery in FY25, with a revenue target of $1 billion. For patient speculators, HIMX could be one of the best emerging market stocks to buy.
GRAB
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Calling Singapore home, grab (Nasdaq:grab) is one of the most exciting ideas in emerging market stocks. Technologically speaking, Grab is in the application software space. According to its company profile, the company offers a digital platform (essentially a super app) that covers a range of services, including mobility and digital financial services. The company targets fast-growing markets such as Cambodia, Indonesia, and Malaysia.
Southeast Asia’s internet economy is alluring, with the potential to become a trillion-dollar ecosystem. That’s why it’s imperative for Grab to grab as much market share in this space as possible. As for its bottom line, it’s not profitable. In the trailing twelve months (TTM), the company made a net loss of $294 million.
However, sales hit a record of $2.49 billion. Moreover, sales growth for the most recent quarter was 24.4%. What’s really attractive here is the valuation. Currently, GRAB stock is trading at 5.57x trailing year sales. However, over the past year, this metric has risen to 6.73x. There is room to go up.
Analysts believe sales could grow 17.8% to $2.78 billion in fiscal 2024. GRAB is definitely one emerging markets stock worth considering.
Sea (Southeast)
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Another Singapore-based company, Ocean (New York Stock Exchange:Southeast) is in the consumer circular sector, specifically internet retail. Together with its subsidiaries, Sea is focused on three core service/product areas: digital entertainment, e-commerce, and digital financial services or fintech (financial technology). Thanks to the fast-growing Southeast Asian market as mentioned above, Sea could enter a viable ecosystem.
Admittedly, there may be some overlap in competition with Grab, which is something to keep an eye on. But Sea also has clear advantages in internet content and e-commerce. To be fair, recent financial performance has been hit-or-miss. Over the past four quarters, Sea’s average EPS has been just 1.3 cents, which isn’t much better than analysts’ expectations of 4.3 cents.
But it’s important to consider the growth opportunities: Revenues for the TTM period reached $13.76 billion. Moreover, in the most recent quarter, sales growth was 22.8%, which is a more relevant number.
Analysts expect sales to grow to $15.41 billion in fiscal 2024, up 17.9% from the previous year. Moreover, the high-side target calls for earnings of $16.79 billion. For speculators, this makes it an attractive investment in emerging market stocks.
Make My Trip (MMYT)
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Based in India, Make My Trip (Nasdaq:About MMIT) is a high-risk, high-reward investment idea among emerging market stocks. In recent years, India has been demonstrating its economic strength and climbing the GDP rankings. In doing so, we can expect India’s consumer cyclical sector to rise. MakeMyTrip, which operates in the travel sector, sells a range of travel products and services in India and other international markets.
The travel-first phenomenon that fueled the US travel industry may well impact India. Again, we are talking about a rapidly growing economy. With collective wealth creation, Indian consumers are also keen to see the world. What is encouraging here are the financials. Over the past four quarters, the company has posted average EPS of 29 cents, well above the average estimate of 16 cents.
MMYT stock is trading at a premium — specifically, 13.41 times trailing sales — compared with 7.09 times over the past year. However, sales growth in the most recent quarter jumped to 36.6%.
Experts expect revenue to grow 25.7% this fiscal year to $983.61 million, making this another attractive emerging market stock buy.
MercadoLibre (MELI)
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Headquartered in Montevideo, Uruguay MercadoLibre (Nasdaq:Meri) also operates in the consumer circulation sector, specifically in internet retail. According to its public profile, MercadoLibre operates an online marketplace of the same name. This e-commerce platform allows businesses, merchants and individuals to list products and sell and buy digitally. It could be one of the game-changers across the Latin American market.
Generally speaking, the financial position is strong. Performance over the past four quarters would have been excellent, except for the fourth quarter being below expectations. Unfortunately, the fourth quarter was a big miss, resulting in an average EPS of $5.59 for the period, compared to the $5.88 expected.
MELI shares have since traded choppily on the market. Still, this could be a bargain opportunity. Currently, the stock is trading at 5.18 times trailing earnings. However, over the past year, this metric has skyrocketed to 5.71 times.
But there may be room for significant growth, with analysts expecting sales to reach $19.13 billion this year, which would represent a 32.2% increase from last year.
Nu
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Based in Brazil, new (New York Stock Exchange:newNu offers its digital banking platform in Mexico, Colombia, the Cayman Islands, Argentina, Uruguay, and its home market. It also serves the United States and Germany. According to its company profile, Nu offers a range of services, including credit cards and prepaid payment cards. Additionally, it is promoting mobile payment solutions. Essentially, as digitalization helps connect the world, Nu could be one of the biggest beneficiaries.
The company has lived up to expectations lately. Over the past four quarters, the company’s average EPS came in at 7.3 cents, beating the average analyst estimate of 6.5 cents. Additionally, the average earnings surprise was 13.55%. But the real story here may be a growth story.
Revenues for the TTM period reached $4.27 billion. In the most recent quarter, revenue growth has skyrocketed to nearly 80%. What’s attractive is that the current multiple isn’t too bad at 9.31x trailing sales. Over the past year, this metric was 8.94x.
Additionally, sales could grow 46.3% to $11.74 billion in fiscal year 2024. The following year, sales could grow another 26.3% to $14.83 billion. NU is definitely one emerging markets stock to consider.
As of the publication date of this article, Josh Enomoto does not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are solely those of the author, which is subject to InvestorPlace.com’s copyright. Publication Guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
