Roughly one year ago, Brazil’s biggest oil firm Petrobras (PBR 17,39 +0,16 +0,93%) was trading below $3 per share. Jim Cramer was on CNBC saying he wouldn’t touch it. “Too much debt”, he said. Then within a month or so Cramer changed his tune. It was so beat up that it was impossible not to take the risk. He told his viewers to buy. Had they bought in February, they would have been up by over 230% today. That beleaguered oil stock made the iShares MSCI Brazil (EWZ 31,83 -0,59 -1,82%) ETF the best of the big four emerging market funds in 2016. Only one smaller fund beat it: Van Eck Global’s Market Vectors Russia Small Cap (RSXJ 11,18 0,00 0,00%) ETF, up over 130%.
Investment advisors who think the S&P 500 is getting too expensive will either sit in cash or buy alternatives, including emerging markets like Brazil and Russia. Brazil is the hottest market of the year, so it’s not cheap. Zoran Milojevic, director of CEEMA and Latin America at Auerbach Grayson says institutional investors are getting back in to riskier securities. First it was the hot money, then the long-term thinking hedge funds, then the value play mutual funds and now those same funds are finding it easier to convince their conservative institutional clients to put money to work outside of the U.S. stock market. If it’s good enough for CalPERS…
Milojevic recommend these following growth stories:
Russia – It’s figured out how to operate with sanctions by stimulating local production through import substitution. Oil prices are rising and the stock market is cheap, trading at under 10 times forward earnings. Van Eck Global’s Market Vectors Russia Small Cap Fund, which is an anti-sanction fund that does not hold banks and big oil, is up 9.03% this year.
Mexico – The Mexican peso is one of the cheapest currencies in the world. It depreciated over 60% in the last four years. The stock market is down 38% in dollar terms. Last week’s IPO of Jose Cuervo was oversubscribed eight-fold. A lot of investment funds are going overweight Mexican securities these days. The iShares MSCI Mexico (EWW 66,95 0,00 0,00%) is up 3.9% this year, a big under-performer. (BlackRock likes local currency debt, by the way.)
South Korea – Milojevic likes its price tag: trading at 8.9x earnings and below 1x price to book based on 2017 estimated earnings. There’s a presidential election this year that should improve the headlines surrounding official corruption by top leaders. The iShares MSCI South Korea (EWY 63,28 +1,10 +1,77%) is up 8.9% year-to-date.
Japan – Remember them? The Nikkei is trading at 14.3x estimated earnings for 2017. The growth of the market is closely linked to the Japanese yen/dollar exchange. “If the rate stabilizes at current levels, corporates should be on the path of double digit earnings growth,” says Milojevic. Weiss Multi-Strategy Advisors in New York picked Japan as a solid buy for 2017 back in December. The iShares MSCI Japan (EWJ 70,92 +0,27 +0,38%) is doing ok, up 4.7%. Also check out WisdomTree’s DXJ DXJ 107,23 +1,66 +1,57%. Auerbach Grayson: Buy These Four Countries Now
Four Countries Worth Buying Now
Roughly one year ago, Brazil’s biggest oil firm Petrobras (PBR 17,39 +0,16 +0,93%) was trading below $3 per share. Jim Cramer was on CNBC saying he wouldn’t touch it. “Too much debt”, he said. Then within a month or so Cramer changed his tune. It was so beat up that it was impossible not to take the risk. He told his viewers to buy. Had they bought in February, they would have been up by over 230% today. That beleaguered oil stock made the iShares MSCI Brazil (EWZ 31,83 -0,59 -1,82%) ETF the best of the big four emerging market funds in 2016. Only one smaller fund beat it: Van Eck Global’s Market Vectors Russia Small Cap (RSXJ 11,18 0,00 0,00%) ETF, up over 130%.
Investment advisors who think the S&P 500 is getting too expensive will either sit in cash or buy alternatives, including emerging markets like Brazil and Russia. Brazil is the hottest market of the year, so it’s not cheap. Zoran Milojevic, director of CEEMA and Latin America at Auerbach Grayson says institutional investors are getting back in to riskier securities. First it was the hot money, then the long-term thinking hedge funds, then the value play mutual funds and now those same funds are finding it easier to convince their conservative institutional clients to put money to work outside of the U.S. stock market. If it’s good enough for CalPERS…
Milojevic recommend these following growth stories:
Russia – It’s figured out how to operate with sanctions by stimulating local production through import substitution. Oil prices are rising and the stock market is cheap, trading at under 10 times forward earnings. Van Eck Global’s Market Vectors Russia Small Cap Fund, which is an anti-sanction fund that does not hold banks and big oil, is up 9.03% this year.
Mexico – The Mexican peso is one of the cheapest currencies in the world. It depreciated over 60% in the last four years. The stock market is down 38% in dollar terms. Last week’s IPO of Jose Cuervo was oversubscribed eight-fold. A lot of investment funds are going overweight Mexican securities these days. The iShares MSCI Mexico (EWW 66,95 0,00 0,00%) is up 3.9% this year, a big under-performer. (BlackRock likes local currency debt, by the way.)
South Korea – Milojevic likes its price tag: trading at 8.9x earnings and below 1x price to book based on 2017 estimated earnings. There’s a presidential election this year that should improve the headlines surrounding official corruption by top leaders. The iShares MSCI South Korea (EWY 63,28 +1,10 +1,77%) is up 8.9% year-to-date.
Japan – Remember them? The Nikkei is trading at 14.3x estimated earnings for 2017. The growth of the market is closely linked to the Japanese yen/dollar exchange. “If the rate stabilizes at current levels, corporates should be on the path of double digit earnings growth,” says Milojevic. Weiss Multi-Strategy Advisors in New York picked Japan as a solid buy for 2017 back in December. The iShares MSCI Japan (EWJ 70,92 +0,27 +0,38%) is doing ok, up 4.7%. Also check out WisdomTree’s DXJ DXJ 107,23 +1,66 +1,57%.