Cheap Stocks in Emerging Markets Hold Great Potential
Given that a new business cycle is upon us, growth stocks have the advantage in this market — defensive names are likely to underperform from here on out. Buying a growth stock that is also inexpensive gives you a double dose of good strategy.
First, take a look at how cheap stocks performed in the last recession in 2002. At that time, stocks priced below $10 a share doubled or tripled in value over the next few years. That’s why there are no cheap stocks in my list of Top 10 Stocks to Avoid for the Rest of the Year.
In terms of sectors, China is at the top of my list. If you think the rally has been impressive in the U.S., take a look at emerging markets. Performance overseas has helped erase the memory of a very painful 2008. Two of my best cheap stocks are China stocks.
I also like biotech. This sector has performed very well so far this year and should continue to do so for the remainder of the year. The current swine flu scare reminds us all the importance of research in dealing with ailments that could stop our economy cold.
Here five cheap stocks to buy now…
Cheap Stock #1: Yanzhou Coal Mining Co. (YZC)
According to a report this past weekend on 60 Minutes, China is opening coal-fueled power plants at a rate of one per week. I suspect you cannot pull the stuff out of the ground fast enough to satisfy the demand.
While that fact is fantastic news for United States coal miners, that dynamic is positively stunning for China coal miner Yanzhou Coal Mining Co. (YZC). InvestorPlace’s resident China expert, Robert Hsu, recommends
the stock to his readers based on the impressive growth potential of the company.
With significant, proven reserves of coal, owning YZC at its current price below $10 per share is like owning a bit of Fort Knox. Sit back and wait for the company to extract and sell the product on the open market.
It is as close to a sure thing as you will find in the market in my opinion.
Cheap Stock #2: Yingli Green Energy (YGE)
Concerned about the pollution caused by coal-burning power plants?
Hedge your China bet with an investment in Yingli Green Energy (YGE). Another favorite of Robert Hsu, YGE is a leader in the development, manufacture and sales of solar energy products.
Solar has taken it on the chin with the collapse in oil prices. The perception is that the expensive transition to alternative energy requires excessively high crude prices. In the short term, that may be true, but investing is all about the long term.
I would view the selling in YGE (the stock has fallen from the mid $20s to just over $5 per share) as an opportunity to acquire a position at a very cheap price. Long-term growth prospects remain very encouraging.
Cheap Stock #3: Marvell Technology Group (MRVL)
Louis Navellier understands growth better than most. His multiple portfolios include a plethora of stocks that are poised for impressive future growth. It is that growth that is expected to lead the way during an economic recovery.
One of the best places to find that growth is in the technology space. Even more specific would be
to hone in on the semiconductor industry. Sales declines appear to have reached a nadir. A new cycle of technology buying can be expected during the next business cycle.
One of Louis’ favorite names in the space is Marvell Technology Group (MRVL). The stock has already doubled in value in anticipation of a recovery, yet still trades for approximately $11 per share. Louis believes that price is still too cheap, and he rates the stock a B or Buy.
Cheap Stock #4: Activision Blizzard (ATVI)
Nancy Zambell spends her time searching for buried treasure stocks. One of the names on her buy list is Activision Blizzard (ATVI).
The company is the leader in the videogame space with four out of the top 10 games, including Guitar Hero in 2008. (More
on Activision here.)
The recession has hurt demand for video games, as such purchases tend to be discretionary. But the longer term prospects of ATVI are outstanding. The stock just recently passed the $10 range, but it’s cheap. Zambell thinks the stock has the potential to double from current prices.
And for those willing to take on a bit more risk, she offers another cheap stock here.
Cheap Stock #5: Emergent Biosolutions, Inc. (EBS)
Emergent Biosolutions (EBS) is a biotech that specializes in developing treatments and vaccines for immune-related illnesses including anthrax, tuberculosis and Hepatitis B.
Shares of EBS have fallen significantly during this bear market, but the company’s products have moved closer to market. That makes this the right time to buy stocks like this.
Investors can now own EBS for less than $10 per share. That is cheap, says Louis Navellier. He rates EBS a buy.
