Investing in Emerging Markets Stocks: Why and How



Oscar Wilde once quipped that giving advice was always silly, but that giving good advice was absolutely fatal. And as someone who gives advice (about buying and selling stocks) for a living, I know the obstacles from deep experience.

My area of specialization is emerging markets stocks, which includes China, India, Russia, Indonesia, Turkey and all of the nations of Central and South America.


I know that I’m always battling headwinds when I recommend stocks from countries in the developing world. It takes an unusually mature investor to put significant money to work anywhere outside his or her home country. That’s just natural.

For most investors, their latitude of acceptance is unbelievably narrow, and includes only stocks in a few limited categories.

First, there are stocks of familiar companies, including tech stocks like Alphabet (Google, GOOGL), Apple (AAPL) and Microsoft (MSFT), oil stocks like Exxon Mobil (XOM), consumer companies like Johnson & Johnson (JNJ), industrials like General Electric (GE), retailers like Amazon (AMZN) and bank stocks like Wells Fargo (WFC).

After all, they think, buying stocks is scary enough without investing in a company you’ve never heard of in another country.

Here’s where my advice-giving mandate kicks in. My job is to give my readers enough confidence that they can hit the BUY button on stocks they may never have heard of and in countries they’ve never visited.

Why should they do that? It all comes down to another famous saying: “If you buy what everyone buys, you get the results that everyone gets.”

Emerging markets stocks can march to their own drummer, and that’s a good thing for your portfolio.

But I never tell people to buy entire markets. And I rarely advise buying regional or country ETFs.

My approach has always been to find the strongest stocks in the entire universe of emerging markets stocks that trade on U.S. exchanges as American Depositary Receipts (ADRs), thus ensuring that they’ve been vetted by the exchanges and have a clean bill of health. Then, when investors are starting to like those stocks, I tell investors to buy.

Here’s an example. This is a chart of TAL Education (XRS), a private education company in China. I recommended that my readers buy this Chinese stock in December 2015, when it was trading at 48. I liked the story: education is hugely important in China, and students who want to attend elite universities need extensive tutoring and extra instruction. Plus, because of China’s one-child policy, they have two parents and four grandparents who are willing to pay what it takes to achieve success. TAL Education’s revenue grew by 43% in its latest fiscal year.


TAL Education will report its latest quarterly earnings next Tuesday (July 26) before the market opens. And if the results are good, I expect it to continue its run higher. If you restrict your stock buying activity to just U.S. stocks and only the U.S. stocks that you know, you’re missing out on a whole world of excellent opportunities just waiting for you.

And I’ll be glad to introduce you.

Get more details about how you can join Cabot Global Stocks Explorer by clicking here. We have six double-digit winners in our portfolio and our readers just gained a 9% return in a stock we recommended only a week ago.

So don’t wait profiting from the fast-growing emerging markets stocks.

Join me now.

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Contrary Opinion buttons here.

“Mr. Market is kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed. And when he gets really enthused … you sell to him, and if he gets depressed, you buy from him. There’s no moral taint attached to that.” 

-Warren Buffett 

Tim’s comment: The theory is as old as the hills, yet applying it in real time is difficult, as we recently saw when the sellers dominated the market after the Brexit vote.

Paul’s comment: I love two things about this quote. The first is that Warren Buffett has a great sense of humor, which I think is always an asset for any investor, no matter what style. The second thing is that Warren is thinking about the morality of investing, which shows that he is every bit as good a human being as he is an investor. And I think it’s encouraging to know those two things about one of the richest men in the world.

Timothy Lutts

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