While the U.S. equities sector generally represents the most stable option for the lion’s share of investors, in some cases, it’s helpful to expand one’s horizons with the top emerging market stocks to buy. Fundamentally, the economy in this nation represents a mature one. Per Investopedia, such economies feature “slowing GDP growth, decreased spending on infrastructure, and a relative increase in consumer spending.”
On the flip side, you have emerging market stocks or publicly traded companies tied to developing regions. Naturally, these investments feature much higher risk as the underlying countries undergo growing pains. At the same time, the rewards you can accrue through this sector – when the stars align correctly – may be astronomical. To be sure, investors shouldn’t throw everything they have at developing regions. Still, if you have some speculation funds lying around, these emerging market stocks might make the most of them.
|DQ||Daqo New Energy||$44.17|
|KLIC||Kulicke and Soffa||$47.81|
Daqo New Energy (DQ)
Based in China, Daqo New Energy (NYSE:DQ) represents both an intriguing entry among emerging market stocks as well as a difficult nut to crack. Specializing in the manufacture of monocrystalline silicon and polysilicon, Daqo presents relevancies for solar photovoltaic systems. With global leaders rapidly pivoting toward clean and renewable energy solutions, DQ appears a no-brainer.
Indeed, the financials would also suggest the same. For instance, Daqo enjoys excellent strengths in the balance sheet, characterized predominantly by its zero-debt profile. Operationally, the company commands a three-year revenue growth rate of 67.8%, leaps, and bounds above the competition. In terms of profitability, Daqo’s net margin stands at over 39%. Again, this metric beats out most rivals in the space.
If that wasn’t enough, the market prices DQ at less than 2-times forward earnings, which is incredibly cheap. Unfortunately, Gurufocus.com warns that it could be too cheap, rating Daqo as a possible value trap.
Still, of the two analysts covering DQ, it’s a consensus moderate buy. The average price target also implies a 65% upside potential. If you want to take potshots with emerging market stocks, DQ could be worth your time.
Operating out of India, MakeMyTrip (NASDAQ:MMYT) is an online travel company founded in 2000. Currently, the company provides online travel services including airline tickets, domestic and international holiday packages, hotel reservations, and rail and bus tickets.
Fundamentally, MakeMyTrip may tempt those considering emerging market stocks because of the underlying potential. According to India Briefing, the country’s tourism market could be worth $125 billion between fiscal years 2026 to 2027. Upside catalysts include “improved infrastructure, more global connectivity, higher disposable incomes, and the development of niche tourism products.”
To be fair, MMYT doesn’t feature a significant fanbase (for now). Only one analyst covers shares, although the expert rates it a moderate buy with nearly 34% upside potential. Better yet, sentiment among hedge funds – what I’d call the smart money – rates very positively. Another factor to consider is MMYT’s resilience. Shares gained almost 4% in the trailing year, a remarkable outing given global economic pressures. If you can overlook some of the operational flaws in MakeMyTrip’s business, MMYT could be one of the emerging market stocks to buy.
If you believe in the electric vehicle revolution, then Brazilian metals and mining firm Vale (NYSE:VALE) practically sells itself. According to its corporate profile, Vale is the largest producer of iron ore and nickel in the world. Indeed, the latter commodity will become incredibly significant if EV integration picks up steam.
According to the Nickel Institute, “[t]he major advantage of using nickel in batteries is that it helps deliver higher energy density and greater storage capacity at a lower cost. Further advances in nickel-containing battery technology mean it is set for an increasing role in energy storage systems, helping make the cost of each kWh [kilowatt hours] of battery storage more competitive.”
Notably, analysts rate VALE as a consensus strong buy. As well, the company presents solid financials. In particular, its revenue trend and net margins over the trailing year rank among the best in the industry. Objectively speaking, VALE pings as undervalued. For instance, the market prices shares at 7.15 times forward earnings. In contrast, the sector median stands at over 13 times. Overall, it makes for one of the best-emerging market stocks to buy on burgeoning automotive trends.
Sibanye Stillwater (SBSW)
Located in resource-rich South Africa, Sibanye Stillwater (NYSE:SBSW) doesn’t strike investors as one of the emerging market stocks to consider. Specializing in mining precious metals, the sector in principle faces significant pressure from the Federal Reserve. With the central bank committed to unwinding prior monetary excesses, the end result of less liquidity is deflationary.
Obviously, precious metals perform far better in inflationary environments – or conditions of rising inflation expectations. However, if deflation becomes the norm, that’s a no-no for gold and similar assets. At the same time, the fear trade may become a greater component of the equation. Certainly, traders think so.
Yes, in the trailing year, SBSW slipped over 12% – not a great performance by any means. However, just in the past five sessions, SBSW rocketed higher to the tune of over 9%. Since early November of last year, the average spot price of gold has been storming higher. Notably, covering analysts rate Sibanye as a consensus moderate buy. They also peg an average price target of $14, representing over 18% upside from the time of writing. This is another metals-related opportunity among emerging market stocks that speculators ought to consider.
Kulicke and Soffa Industries (KLIC)
If you’re seeking discounted opportunities in emerging market stocks, Kulicke and Soffa Industries (NASDAQ:KLIC) delivers the goods. Yes, I talk frequently about KLIC and that’s because when I run screeners for cheap equities, it routinely comes up. Here’s the thing: I’m not sure how long this circumstance will last. Therefore, grab the discount while you can.
Per its public profile, Kulicke represents a leading provider of semiconductor, LED, and electronic assembly solutions serving the global automotive, consumer, communications, computing, and industrial markets. It’s possible – though not guaranteed – that its wide footprint could make the company recession resistant.
Onto the financials which is where the magic happens, Kulicke first and foremost enjoys a stable balance sheet. Featuring a lofty cash-to-debt ratio of 18.6 times and an Altman Z-Score of 8 (reflecting very low bankruptcy risk), KLIC brings confidence to investors. Not only that, the company kills it in terms of long-term revenue growth and key profitability metrics. Despite these goodies, the market prices KLIC at 6.8 times trailing earnings. In contrast, the sector median stands at 16.3 times. Seriously, put KLIC on your wish list of emerging market stocks before others catch on.
Hailing from our neighbors down south, FEMSA (NYSE:FMX) calls Monterrey, Mexico home. Per its public profile, the company is a multinational beverage and retail company. Its biggest claim to fame is that it represents the largest independent Coca-Cola (NYSE:KO) bottling group in the world. It also owns the largest convenience store chain in Mexico.
While the political narrative regarding U.S.-Mexico relations centers on people there attempting to move here, from an investment perspective, FEMSA arguably offers far better opportunities than established U.S. beverage firms. Fundamentally, Mexico features superior demographics in that younger age cohorts stand ready to replace retiring older workers.
When you’re assessing emerging market stocks levered to consumer sentiment, such demographic trends are what you want to see. But despite the advantageous backdrop, the market still prices FMX at a discount. Currently, shares trade hands at 16.7-times forward earnings, below the sector median of 21.8 times. Notably, covering analysts rate FEMSA as a consensus strong buy. Also, their average price target reached $97.73, reflecting over 21% upside potential.
Sea Ltd. (SE)
Although carrying a supposedly promising narrative – even stacked against other high-profile emerging market stocks – Singapore’s Sea Limited (NYSE:SE) didn’t exactly come through in 2022. In the trailing year, shares dropped nearly 72% in equity value, reflecting the shock of global recessionary fears. That’s a shame because digital entertainment, financial technology, and e-commerce platforms command significant potential.
To be fair, the financials don’t look pretty at the moment. Against traditional metrics such as price relative to sales or book value, Sea rates as significantly overvalued. Further, Gurufocus.com’s proprietary calculations for fair market value arrived at the same conclusion. On the balance sheet, circumstances don’t rate auspiciously, particularly with an Altman Z-Score of 1.43 sliding into the distressed zone.
On the other hand, covering analysts rate SE as a consensus moderate buy. Individually, this breaks down to nine buys and four holds. As well, their average price target hit $88.54, reflecting a 67% upside potential. Finally, hedge funds believe that good times are ahead, with TipRanks stating that sentiment pings as very positive.
If you want to gamble with your emerging market stocks, SE could be your ticket.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.