Emerging market stocks are those of companies that are headquartered in countries with economies that feature a low- to mid-range per capita income. Today, China –despite being the second-largest economy in the world — is still considered an emerging market.
One reason that emerging market stocks are drawing attention is that the U.S. stock market feels a little overvalued to investors. And, emerging market stocks have lagged behind U.S. equities during this latest bull market.
And just when it was looking safe to invest in emerging markets, the coronavirus is creating a new level of uncertainty. That said, as much as investors hate uncertainty, a small amount of exposure to emerging markets may be worth the risk since it can provide investors with exposure to countries with a generally younger demographic and the potential for a faster growing economy.
As you might expect, China is providing investors with some of the best opportunities among emerging market stocks including Alibaba (NYSE:BABA) and Tencent (OTCMKTS:TCEHY). However, since we’re only going to take a look at three stocks, I’m going to stay away from China and suggest a few emerging market stocks that may have less immediate exposure to the coronavirus.
So, let’s dive in.
Emerging Market Stocks to Buy: ICiCi Bank Ltd. (IBN)
The first stock I want to review is ICiCi Bank Ltd. (NYSE:IBN). ICiCi Bank is an Indian multinational banking and financial services company. And as of 2018, IBN was the second largest bank in India in terms of assets and market capitalization.
The stock is down about 7% in 2020, but has gained 44% in the past 12 months. Including its dividend, IBN has rewarded shareholders with a total return of 48%. Over the past 5 years, the company was averaging a 8% total return.
Moreover, at the company’s Analyst Day event in December, ICiCi Bank emphasized its focus on their efforts to build a “retail bank with a digital edge”. As a way to build its digital banking presence, the company is investing heavily in building in-house analytics capabilities.
In the company’s most recent performance review from December, it cited 15% growth in the average current and savings account (CASA) deposits in the third quarter. On a year-over-year basis, term deposits were up 24%, domestic loan growth was up 16% and retail loans grew by 19%.
Overall, ICiCi Bank is one of the best emerging market stocks investors can buy right now.
Cosan Ltd (CZZ)
Cosan (NYSE:CZZ) is one of Brazil’s largest companies. The energy conglomerate produces a diverse portfolio of bioethanol, sugar and energy. In addition to Brazil, the company has operations in Argentina, Uruguay, Paraguay, Bolivia and the United Kingdom.
The stock is down about 21% in 2020, but it has posted a gain of around 57% in the past year. Cosan is essentially a bet on how you feel about the direction of commodities. The company is not widely covered by analysts, but it does have a consensus buy rating and a price target that suggests a modest move upward from the stock’s current level.
In the company’s report to investors in December, they cited a 20% growth EBITDA of assets under management over the past 10 years. So collectively, this along with other catalysts makes CZZ another great emerging market stock to buy.
Telkom Indonesia (TLK)
The last company I want to highlight is Telkom Indonesia (NYSE:TLK). TLK has been in a slump that caused some hedge funds to bail on the stock in October 2019. And not surprisingly, the stock has slumped since then.
However, TLK is a bet on Indonesia’s population which is growing approximately three times faster than the United States.
Currently the company is facing a headwind due to a dispute with Netflix (NASDAQ:NFLX). The company has been blocking Netflix since 2016. However, Telkom says they are maintaining a dialogue with the streaming service.
The company has had annualized sales growth of about 12% over the past five years. And while that might not get investors excited, the company does offer a reasonably attractive annual dividend. In 2019, the company paid out a dividend of about 77 cents per share, and has been growing its dividend an average of 1.7% for the last three years.
So, does TLK have an issue? Sure. But that doesn’t mean it’s not one of the best emerging market stocks an investor can find right now.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.