Emerging Market Plays That Soared, or Not, in 2011

by Charles Sizemore | January 4, 2012 8:00 am

My emerging markets investments were a mixed bag last year. My biggest success came from Visa (NYSE:V[1]), ending the year up over 44%.

I loved Visa when I recommended it, and I continue to love it now, even at current prices. But I should be very clear that I do not expect another year of 44% returns. Yes, Visa is still at the crossroads of two powerful macro trends — the rise of the emerging market consumer and the shift toward a global cashless economy — and these are trends I see persisting for years to come.

But 2011 was unique in that the stock had been depressed by political risk stemming from the Durbin Amendment to the Dodd-Frank financial reform package. When the cloud of uncertainty was lifted, Visa and rival MasterCard (NYSE:MA[2]) both enjoyed monster rallies. That kind of political risk simply doesn’t exist right now. Still, I do expect Visa to outperform the S&P in the years ahead.

On a side note, my Visa recommendation was the winning pick in InvestorPlace’s 10 Stocks for 2011[3] contest (Read about my follow-up pick for 2012[4], and check out the rest of the “10 Best Stocks for 2012[5]”).

Unilever (NYSE:UL[6]) has also quietly generated good returns for me. It ended the year up a solid 8%, and its total return since I recommended it in December of 2010 is a not-too shabby 16%. Unilever already gets more than half of its revenues from emerging markets and pays a great dividend. This is one I recommend holding for the remainder of the decade.

Colgate-Palmolive (NYSE:CL[7]) is another stock that has quietly put out decent returns. The stock ended the year up almost 15% and 21% in total returns since I recommended it in November of 2010. This is another company that is far from sexy — it sells soap and toothpaste — but it’s precisely the right kind of stock to own in a choppy, trendless market.

DirecTV (NASDAQ:DTV[8]) has done relatively well. The stock ended the year up 7%, which isn’t bad considering the abuse the markets have taken over the past year. Warren Buffett made a splash when he announced that Berkshire Hathaway (NYSE:BRK.B[9]) had taken a large position in DirecTV, and I continue to like the company as a backdoor way to get access to the rising middle classes of Latin America. Hold on to this one.

Busts

Procter & Gamble (NYSE:PG[10]) was a roller-coaster stock in 2011 that almost ended flat until it squeaked out major gains in late December, making for a yearly return of 3.7%. This isn’t a huge bust, but — if not for managing a respectable 16% total return since I recommended this stock in July of 2010 — I would call PG a disappointment. Like the other dividend-paying consumer products companies, I continue to like P&G and recommend holding it for another quarter or more. It pays a reliable dividend, which matters in a market like this.

Nestle (PINK:NSRGY[11]) has also been a bit of a disappointment after taking a beating due to the Swiss franc’s fluctuations and due to volatility spilling over from the euro zone. Still, Nestle is one of the finest companies in the world, pays a great dividend and has exposure to emerging markets that goes back decades. This is one stock I recommend you hold on to for a while.

Finally, my broad play on the rise of the emerging market consumer — the EGShares Emerging MarketsConsumer ETF (NYSE:ECON[12]) was down 5.7% for 2011, which compares quite favorably to most broad emerging market indices. As a point of reference, the popular iShares MSCI Emerging Markets (ETF) (NYSE:EEM[13]) was down 20.36% for the year. Therefore, I continue to recommend ECON as a core, long-term holding.

Source URL: https://investorplace.com/2012/01/emerging-markets-booms-busts-2011/

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