It’s out! We just delivered our annual super-sized Investment Digest Top Picks issue to subscribers last week. Inside are over 50 Top Picks for 2013 from our expert contributors, each representing their single best investment candidate for this year. The picks range from $1-and-under small-cap pharmaceuticals to some of the largest companies in the world.
But among all the variety, there was one trend so popular it was simply undeniable. In fact, I think this theme is going to be so big this year that every informed investor should have a stake in it.
(Before I tell you about the big theme, I should note that it’s still not too late to subscribe to Investment Digest now and get ALL the Top Picks for 2013. Subscribe at our special price now and we’ll rush you the Top Picks issue with all 50-plus best ideas for this year, plus we’ll send you a special report with another seven of my favorite breakout picks for 2013.)
Now, where do I think every intelligent investor should be invested this year? I’ll let our contributors explain, with snippets from their 2013 Top Picks submissions:
Nicholas Vardy, Editor of Alpha Investor Letter, wrote: “Emerging markets have always been characterized by boom and bust. Yet over the long term, they have outperformed developed markets by a country mile. ... But that’s not been the case over the past two years, during which emerging markets underperformed the U.S. stock market by well over 20%. I predict that 2013 will be the year that emerging markets will reclaim their traditional place as high-octane, high-performance markets.”
Donald Sazdanoff, Editor of The Sovereign Advisor, wrote: “The emerging market indices have over the past year lagged the S&P500, as the economic slowdown in the more developed countries has lowered the demand for commodities of which the emerging economies are heavy suppliers. I look for this trend to begin to change as private sector balance sheets are stronger, making consumers feel more confident in their spending, thereby increasing the demand for commodities.”
And Jim Lowell, Editor of Fidelity Investor, wrote, “2013 may start out looking like a falling soufflé for any international play. But, unloved and overlooked are two key ingredients to my contrarian stance. ... Meanwhile, the theme of growing global consumers has me more bullish about the long-term prospects for emerging market stocks and bonds than most.”
None of these advisors knew what the others were going to say before they submitted their Top Picks for 2013—they all came to these nearly-identical conclusions independently. And they weren’t the only ones. That tells me that this mindset is likely not limited to our contributors: I expect to see a lot more dollars flowing into emerging markets this year. So you want to get there first!
In our Top Picks issue, several advisors recommended riding the emerging market resurgence by buying ETFs tracking emerging market indexes, like the iShares MSCI Emerging Markets Index (EEM). But several of our contributors gave ideas for more specific bets as well. Three picked internationally focused mutual funds with active managers.
And three other contributors all chose the iShares MSCI Mexico Investable Market Index (EWW) as their Top Pick. If that’s not a strong buy signal, I don’t know what is!
Mexico is riding some of the same favorable trends as other emerging markets this year. It, too, was punished by risk-averse investors in 2011 and the first half of 2012. But as you can see from a chart of EWW, interest in the country is picking up. Here are parts of two of the Top Picks recommendations of EWW, explaining the analysts’ reasons for betting on Mexico in particular.
Nicholas Vardy, Editor of Bull Market Alert, said he chose EWW because, “I think manufacturers setting up in Mexico just might be the most under-reported mega-trend in global investing. While Mexican wages were 237% higher than Chinese wages in 2002, that cost advantage today has shrunk to 15%. Moreover, Mexico’s most obvious advantage is geographic location. ... Americans currently pay 30% more for Chinese products and 40% less for Mexican products, compared to 2007. Since joining NAFTA in 1994, Mexico’s trade with the United States is duty free. ... Even while much of the global economy struggles, Mexico has been doing just fine, thank you. In early 2012, Mexico’s Gross Domestic Product (GDP) grew at an annual rate of 4.6%. Mexican car exports to the United States have now exceeded those from Japan, Korea and Germany.”
Jim Powell, Editor of Global Changes & Opportunities Report, made a similar argument based mainly on Mexico’s advantages as a manufacturing partner for the U.S. He wrote: “Few countries in the world have made a greater commitment to promoting trade than Mexico. The government signed free trade agreements with 44 other nations, which is more than twice as many as China and four times more than Brazil. Mexico shares a 2,000-mile border with the U.S., which gives the country a big advantage over its competitors. Although China can still make most products at a lower cost, the advantage usually disappears when transportation expenses are included. Mexico’s close proximity to its markets also means it can quickly respond to the changing needs of its customers. Mexico is in the same time zone as most of its customers; instead of waiting until the middle of the night or the next day to call a supplier in China or India, a U.S. customer can pick up the phone and do business right away with Mexico. Mexico also has a young, well-educated and energetic workforce. Over half the population is under 29.”
The third EWW recommendation came from Mary Anne & Pamela Aden, Editors of The Aden Forecast. They made additional points about the strength of Mexico’s oil and gas sector and its stock market.
Taken together, the recommendations paint a convincing picture of a fantastic place to invest in 2013. If you’re not invested in emerging markets right now, this is one signal I wouldn’t ignore.
And remember, you can read the rest of the EWW recommendations, as well as all our contributors’ other ideas for playing the emerging market resurgence, by becoming an Investment Digest subscriber now. See our special offer for the Top Picks for 2013 here and enjoy the Top Picks issue and a year of bi-weekly issues at a limited-time special reduced rate.
Wishing you success in your investing and beyond,
Chloe Lutts
Editor of Investment of the Week
