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It's no secret that China's phenomenal growth has been driving the global recovery. China's first-quarter GDP grew at an 11.9% annual pace despite three significant increases to reserve requirements that were designed to cool lending and growth. That's why in much of 2009 and early 2010 I was bullish on China and overweighted my global portfolios in favor of this country.
But all good things must come to an end and right now it's time to get selective about which China stocks you buy. That's why I recommend investors cut back their China holdings and look for new opportunities in emerging markets.
To be clear, there is no "China bubble" that will burst tomorrow and erase your portfolio. I'm just stating that the market there has thinned out dramatically and that the best days are behind us. There are a few opportunities in the country that still have great potential -- including hot stocks in China's coal industry. I'm also bullish on Chinese agriculture stocks including Yuhe International (YUII) and Yongye International (YONG). But a few good stocks can be found in fading sectors or fading regions all the time, and these are not proof that China has staying power.
The fact is that there are many reasons to be cautious in this region. There's fear of an escalating trade war with the U.S. There's evidence China's currency, the yuan, will continue to rise and cause significant shake-ups in global markets. There's a continued drumbeat of runaway real estate prices, with the latest showing numbers that despite moderate cooling in housing prices there is increased land-buying activity.
Not to mention the global market's recent trouble caused by Greece's debt woes, the crude oil spill in the Gulf of Mexico and so forth.There's simply no need to take on the risk of having a portfolio overweighted in China with all these dark clouds on the horizon.
So if not China, then where? To help you transition out of the People's Republic, here are a few up and coming emerging markets to watch:
The first non-U.S. country I'm targeting for market-beating gains in the year ahead is Israel. I have many reasons to be bullish on Israel, but my top motivation to invest here is the strong "currency tailwind" from a rising shekel and favorable exchange rates. This naturally boosts corporate profits, even if sales remain flat. Adding to that momentum, however, is the fact that Israel's economy is booming thanks to the global economic recovery. Additionally, this nation is formally moving from emerging to established status for institutional investors, we're at the beginning of what should be a fantastic growth run for Israel.
My top Israel stock right now is Internet Gold-Golden Lines (IGLD). This communications stock is one of Israel's largest Internet service providers. Internet Gold-Golden Lines provides Internet access to more than 960,000 home subscribers and about 90,000 business customers through its Smile.com subsidiary. The company's other services include virtual private networking and Web hosting. Its Smile.Media subsidiary manages Internet portals and e-commerce services, while its Internet Gold International branch handles these activities outside of Israel. The stock is up more than 35% year to date.
Another booming emerging market is Latin America. In years past, investors have largely cashed in on natural resource plays or utilities, but this market is opening up as a booming middle class increases spending and more Western businesses reach out to the region. Consider that Brazil auto sales hit an all-time high in 2009 even as U.S. auto sales were collapsing. Ford Motor Co. (F) alone saw 2009 Brazil sales jump 11.35% from the previous year to 3.14 million units -- a third straight annual record. Strong global sales are just one reason Ford earnings impressed Wall Street at the end of January.
Global blue chip stocks like Ford are always a good way to play emerging markets, but if you really want to roll up your sleeves and get into Brazil I recommend Companhia de Bebidas das Americas (ABV). Translated to the "American Beverage Company," and commonly known simply as AmBev, this stock company dominates the Brazilian beer market with brands such as Antarctica, Brahma and Skol. Additionally, the company sells Pepsi brands, Lipton iced tea and other beverages that include mineral water and sports drinks. Along with Brazil, AmBev sells its products in some 13 other countries, including the South and Central American countries of Argentina, Peru, Ecuador, Uruguay and Venezuela. Consumer spending is booming in this region right now, and should not be underestimated. Even Latin America airline stocks are taking off while the U.S. industry is in a tailspin! Arising middle class is getting more expensive tastes and really pushing beverage sales up dramatically. ABV will surely cash in on this trend.
It's hard to say goodbye to such a profitable emerging market, but China is peaking (or has already peaked) and it's time to start transitioning out of this region. If you hang on too long you risk losing all the ground that you made up over the past 18 months or so. There are still a few select Chinese stocks with potential, but my money is going to other emerging markets like Israel and Latin America in pursuit of profits.
As of this writing, Louis Navellier owned YUII, YONG, IGLD, F and ABV in personal or client portfolios.
The fact is that there are many reasons to be cautious in this region. There's fear of an escalating trade war with the U.S. There's evidence China's currency, the yuan, will continue to rise and cause significant shake-ups in global markets. There's a continued drumbeat of runaway real estate prices, with the latest showing numbers that despite moderate cooling in housing prices there is increased land-buying activity.
Not to mention the global market's recent trouble caused by Greece's debt woes, the crude oil spill in the Gulf of Mexico and so forth.There's simply no need to take on the risk of having a portfolio overweighted in China with all these dark clouds on the horizon.
So if not China, then where? To help you transition out of the People's Republic, here are a few up and coming emerging markets to watch:
The first non-U.S. country I'm targeting for market-beating gains in the year ahead is Israel. I have many reasons to be bullish on Israel, but my top motivation to invest here is the strong "currency tailwind" from a rising shekel and favorable exchange rates. This naturally boosts corporate profits, even if sales remain flat. Adding to that momentum, however, is the fact that Israel's economy is booming thanks to the global economic recovery. Additionally, this nation is formally moving from emerging to established status for institutional investors, we're at the beginning of what should be a fantastic growth run for Israel.
My top Israel stock right now is Internet Gold-Golden Lines (IGLD). This communications stock is one of Israel's largest Internet service providers. Internet Gold-Golden Lines provides Internet access to more than 960,000 home subscribers and about 90,000 business customers through its Smile.com subsidiary. The company's other services include virtual private networking and Web hosting. Its Smile.Media subsidiary manages Internet portals and e-commerce services, while its Internet Gold International branch handles these activities outside of Israel. The stock is up more than 35% year to date.
Another booming emerging market is Latin America. In years past, investors have largely cashed in on natural resource plays or utilities, but this market is opening up as a booming middle class increases spending and more Western businesses reach out to the region. Consider that Brazil auto sales hit an all-time high in 2009 even as U.S. auto sales were collapsing. Ford Motor Co. (F) alone saw 2009 Brazil sales jump 11.35% from the previous year to 3.14 million units -- a third straight annual record. Strong global sales are just one reason Ford earnings impressed Wall Street at the end of January.
Global blue chip stocks like Ford are always a good way to play emerging markets, but if you really want to roll up your sleeves and get into Brazil I recommend Companhia de Bebidas das Americas (ABV). Translated to the "American Beverage Company," and commonly known simply as AmBev, this stock company dominates the Brazilian beer market with brands such as Antarctica, Brahma and Skol. Additionally, the company sells Pepsi brands, Lipton iced tea and other beverages that include mineral water and sports drinks. Along with Brazil, AmBev sells its products in some 13 other countries, including the South and Central American countries of Argentina, Peru, Ecuador, Uruguay and Venezuela. Consumer spending is booming in this region right now, and should not be underestimated. Even Latin America airline stocks are taking off while the U.S. industry is in a tailspin! Arising middle class is getting more expensive tastes and really pushing beverage sales up dramatically. ABV will surely cash in on this trend.
It's hard to say goodbye to such a profitable emerging market, but China is peaking (or has already peaked) and it's time to start transitioning out of this region. If you hang on too long you risk losing all the ground that you made up over the past 18 months or so. There are still a few select Chinese stocks with potential, but my money is going to other emerging markets like Israel and Latin America in pursuit of profits.
As of this writing, Louis Navellier owned YUII, YONG, IGLD, F and ABV in personal or client portfolios.
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