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Look South and East for Top Buy Stocks - Indian, Brazilian and Mexican Stocks for Your Portfolio

Mar 21, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • Tim Love, the Investment Director for GAM Investments’ emerging market equity strategies, discussed that it may be time for investors to briefly pause investments into expensive Indian stocks in favor of cheaper emerging markets in an interview with Bloomberg last week. As an Investment Director with GAM Investments, Love manages about USD$1bn of emerging market equities.  
     
  • Although Love is bullish on Indian stocks long-term, he believes that the regions’ current premium to other emerging markets and global equities is far too expensive.
     
  • On a forward looking basis, Indian stocks trade at a 53% premium to broader emerging markets and a 19% premium to aggregate global equities, as can be seen in the chart below.

 


 

  • While broader emerging markets have rallied this year with the iShares MSCI Emerging Markets ETF (EEM) up 11.75% YTD, Indian stocks have lagged this year with the iShares MSCI India ETF (INDA) up just 6.96% YTD. The deviation comes after Indian stocks fell 7.57% in 2018 while broader emerging market stocks fell by a much worse 17.11%.
     
  • Another theory suggests that underperformance of Indian stocks, relative to broader emerging markets, may be driven by investor anxiety ahead of the country’s national elections in April and May of this year. Love explained that, “The biggest risk after elections is the probability of a new government indulging in massive social spending and what impact it will have on the country’s fiscal account. If anyone replaces the incumbent, it will be a material negative as it may slow down reforms.”
     
  • Although Love is bullish long-term on Indian stocks, he explained in the interview that he plans to wait another 12-18 months to assess whether he will resume buying Indian stocks. A dip in Indian stock prices due to geopolitical tensions, however, will provide investors with an opportunity to add to Indian stock holdings, Love explained.  
     
  • For our investors who may be looking to buy Indian stocks amid a dip in prices, the following “Top Buy” stocks in our Indian All-Cap should be among your top considerations.
     
  • Colgate-Palmolive (India) Limited (BSE: 500830) manufactures and sells personal and oral care products, such as toothpastes, toothbrushes, and mouthwashes, in India.  
     
  • Jubilant FoodWorks (NSEI: JUBLFOOD) is a food service company that develops and operates Domino’s Pizza and Dunkin’ Donuts locations in India and other developing countries.  
     
  • Tata Consultancy Services Limited (NSEI: TCS) is an information technology company based in India that offers cloud-based solutions, cognitive automation systems, and other tech solutions to customers.
     
  • As previously mentioned, Love is pausing investments into Indian stocks due to expensive valuations relative to global stocks and other emerging markets. In the interview, Love advised, “Other nations such as Mexico, Brazil, Turkey, or Russia look incredibly cheap at the moment.” 
     
  • Investors looking to introduce or add Brazilian stock exposure to their portfolio should consider names highlighted as "Top Buy" in our Brazilian All-Cap Global Top Stock Ideas.
     
  • For investors who are interested in buying Mexican stocks, below we highlight some of the most attractive “Top Buy” stocks in our Mexico All-Cap stock model.
     
  • Coca-Cola FEMSA, S.A.B. de C.V. (KOF) is the franchise bottler, producer, marketer, and seller of Coca-Cola trademark beverages across Latin and South America.  
     
  • Wal-Mart de Mexico, S.A.B. de C.V. (MVB: WALMEX) is the owner and operator of self-service stores across Mexico and Central America.  
     
  • Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (BMV: OMA B) and its subsidiaries develop, operate, and maintain airports across the country of Mexico.

 

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS