2014 will be the year that emerging markets — and the emerging market ETFs and stocks that profit off them — make a comeback.
Emerging market stocks, as measured by the iShares MSCI Emerging Market Index ETF (EEM), have been drifting lower for nearly three years and are still well below their pre-2008-meltdown highs. In fact, since the second quarter of 2011, emerging markets have trailed the S&P 500 by more than 50 percentage points. Other funds in the same vein have achieved similar results.
So to say that emerging market ETFs have been collectively left in the dust would be an understatement.
But while the class has been largely ignored during the past three years, some real values are emerging. As I wrote recently, when measured against national GDP, most of the largest emerging markets look absurdly cheap and are priced to deliver annual returns well in excess of 15%. For instance, by GuruFocus estimates, China is priced to deliver an almost ridiculous 34.3% per year.
So, with no more ado, I’m going to offer my five favorite emerging market ETFs for 2014: