Google Inc (GOOG): The BRICS and the Bathwater

Page 1 of 2

Has the sun set on Brazil, Russia, India, China and South Africa (BRICS)? With the end of China’s commodity boom many people are calling for the end of the BRICS. China’s aging population and the government’s push to make the economy more consumption oriented means less demand for raw materials. Still, investors have to be careful not to throw out the baby with the bathwater.

All Is Not Lost

While making a bet on high growth in the BRICS is a questionable idea, there are still strong investment opportunities to be found. Brazil is a good example. The nation’s GDP growth rate is falling, and the country was recently rocked by massive protests over price increases. But, over the past decade the country has seen its GINI coefficient fall significantly. A falling GINI index means more money flowing to the middle and lower classes.




Brazil GINI Index data by YCharts

Look at the Middle Class

Good investments can be made by looking selling to the middle class. In China alone the middle class is expected to grow to 700 million, a little more than double the current middle class population. While the first BRICS boom was based on raw materials, the second stage will be more consumption oriented.

Three Good Investments

Google Inc (NASDAQ:GOOG) was birthed in America, but it is a good emerging market play. Its Android operating system is open source and provides a great computing platform for price conscious consumers. Android is one of the prime operating systems for tablets and smartphones, cheaper alternatives for a laptop. Tablet sales are expected to surpass PC sales this year, and Google has a strong medium to promote its profitable ad network and search engine.

Google Inc. (GOOG)Between Google.com, YouTube, AdSense and other products, Google Inc (NASDAQ:GOOG) is able to make a profit margin of 20.9%, an earnings before interest and taxes (EBIT) margin of 25.3% and a return on investment (ROI) of 14.3%. It is a little pricey with a price to earnings (P/E) ratio around 27, but the company is very profitable and has a strong growth profile.

Another interesting company to watch is ARM Holdings plc (ADR) (NASDAQ:ARMH). ARM Holdings makes energy efficient processors that have proven to be very popular with mobile devices. Even Microsoft released a Windows OS that is ARM specific.

Smartphones and tablets allow consumers to check their email, shop online, read the news, play games and update their social networks. Traditional laptops suffer from reduced battery life and higher costs. With developing electricity grids and massive blackouts, strong battery life is an important pain point that ARM Holdings plc (ADR) (NASDAQ:ARMH) effectively addresses. With a total debt to equity ratio of 0.00, a profit margin of 28.4% and a ROI of 13.7%, ARM Holdings is financially a strong company.

Right now ARM Holdings plc (ADR) (NASDAQ:ARMH) is too expensive. Its P/E ratio is around 70 and market competition is about to heat up. Intel Corporation (NASDAQ:INTC) is looking to improve its mobile offerings and this will put pressure on other players.

Yum! Brands, Inc. (NYSE:YUM) is the Wal-Mart Stores, Inc. (NYSE:WMT) of the fast food world. The company owns KFC, Pizza Hut and Taco Bell. Yum!’s 6,000 Chinese stores recently took a hit when excessive levels of antibiotics were found in some of the KFC’s chicken. Sales and income took a steep fall, but already the company is coming back. Everyone needs to eat, and Yum! Brands has found the sweet spot with the emerging market middle class. Its food is a status symbol, but it is not prohibitively expensive.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!