In this article, we discuss 12 best emerging market stocks to buy now.
Emerging markets across the world have been battered by a stronger US dollar, higher inflation, and tighter financial conditions in the past few months, with prominent stocks like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Baidu, Inc. (NASDAQ:BIDU), and Vale S.A. (NYSE:VALE) all facing the heat of a macro slowdown in the global economy. However, the slowdown has created an attractive buying opportunity for investors who can pick up the shares of solid businesses at discounted prices and reap the rewards later.
Emerging markets, a term used to broadly categorize the markets in emerging economies of Brazil, Russia, India, China, and South Africa, have suffered a fifth consecutive quarter of negative returns, and the blended asset class is now well into its worst-ever drawdown over the past several decades. According to a report by Lazard Asset Management, however, the bottom-up fundamentals in the sector remain generally solid, valuations seem attractive, and investor positioning is also light.
Between June and September this year, the MSCI Emerging Markets Index slumped by close to 11%. This brought the year-to-date decline in the index to an alarming 27%. To put this figure into further context, the developed markets MSCI World Index only registered a decline of 6% in the third quarter, representing a year-to-date decline of around 25%. The Russian invasion of Ukraine and fears of a real estate market crash in China, in addition to supply chain concerns impacting manufacturing in India, are weighing on emerging markets.
Per data collected by the Institute of International Finance, small inflows into emerging market debt for the year until end-May were almost all offset by outflows from equities. The IIF predicted that year-on-year foreign portfolio flows to emerging markets could shrink by 42% to less than a trillion dollars in 2022. Ashish Chugh, a portfolio manager for Loomis Sayles, told news agency Reuters recently that there was bullish sentiment on emerging markets like China, due to policy support and significant pressure from government officials to boost growth.
Our Methodology
The companies that operate in the emerging market sector were selected for the list. The analyst ratings of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Best Emerging Market Stocks to Buy Now
12. Sigma Lithium Corporation (NASDAQ:SGML)
Number of Hedge Fund Holders: 3
Sigma Lithium Corporation (NASDAQ:SGML) engages in the exploration and development of lithium deposits in Brazil. It is one of the best emerging market stocks to invest in. On September 22, LG Energy Solutions announced that it has made a partnership with Sigma Lithium for the supply of battery grade lithium. On July 12, Sigma Lithium said that they have completed 25% construction of their Greentech Lithium Plant. The company is planning for 600 professionals to work on the site.
Among the hedge funds being tracked by Insider Monkey, San Francisco-based investment firm Potrero Capital Research is a leading shareholder in Sigma Lithium Corporation (NASDAQ:SGML), with 847,394 shares worth more than $13.1 million.
Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Baidu, Inc. (NASDAQ:BIDU), and Vale S.A. (NYSE:VALE), Sigma Lithium Corporation (NASDAQ:SGML) is one of the best emerging market stocks to buy now.
11. YPF Sociedad Anónima (NYSE:YPF)
Number of Hedge Fund Holders: 10
YPF Sociedad Anónima (NYSE:YPF) is an energy company that engages in the oil and gas upstream and downstream activities in Argentina. It is one of the top emerging market stocks to invest in. On September 1, YPF SA and Petronas of Malaysia were discussing plans to build a liquified natural gas plant and new gas pipeline in Argentina. If the agreement materializes, it would generate an investment of $40 billion. Both companies have already worked together before.
On October 13, investment advisory Grupo Santander upgraded YPF (NYSE:YPF) stock to Outperform from Underperform with a $12.70 price target. Analyst Walter Chiarvesio issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in YPF Sociedad Anónima (NYSE:YPF), with 3 million shares worth more than $10 million.
10. MakeMyTrip Limited (NASDAQ:MMYT)
Number of Hedge Fund Holders: 10
MakeMyTrip Limited (NASDAQ:MMYT) is an online travel company that sells travel products and solutions in several countries. It is one of the prominent emerging market stocks to invest in. On October 14, MakeMyTrip announced a partnership with Lohono Stays, a luxury vacation rental market provider in India, to grow more luxury home stays segments across the country to attract international travelers. MakeMyTrip is also offering third-night free on all bookings on all listed properties of Lohono Stays.
On September 14, JPMorgan analyst Ankar Rudra initiated coverage of MakeMyTrip Limited (NASDAQ:MMYT) stock with an Overweight rating and a $44 price target, noting that the company is a key beneficiary of structural growth in online travel in the long term.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in MakeMyTrip Limited (NASDAQ:MMYT), with 1.7 million shares worth more than $44 million.
At the end of the second quarter of 2022, 10 hedge funds in the database of Insider Monkey held stakes worth $90 million in MakeMyTrip Limited (NASDAQ:MMYT), compared to 8 in the preceding quarter worth $87 million.
9. Pampa Energía S.A. (NYSE:PAM)
Number of Hedge Fund Holders: 11
Pampa Energia S.A. (NYSE:PAM) is an integrated power company that engages in the generation and transmission of electricity in Argentina. It is one of the major emerging market stocks to invest in. On September 30, Argentina was in talks with the country’s natural gas producers such as Pampa Energia, YPF SA, and other producers, for financing for the second phase of a pipeline to transport the fuel in consumption hubs. Around $2 billion is needed for this project.
At the end of the second quarter of 2022, 11 hedge funds in the database of Insider Monkey held stakes worth $78.5 million in Pampa Energia S.A. (NYSE:PAM), compared to 10 in the previous quarter worth $78.3 million.
8. Itaú Unibanco Holding S.A. (NYSE:ITUB)
Number of Hedge Fund Holders: 11
Itaú Unibanco Holding S.A. (NYSE:ITUB) offers a range of financial products and services to individuals and corporate customers in Brazil and internationally. It is one of the elite emerging market stocks to invest in. On August 26, Itaú Unibanco revealed a stock repurchase plan to buy back up to 75 million preferred shares, without a capital reduction, canceled or replaced in the market, to be held in treasury. This program will run from August 25, 2022 to February 24, 2024.
On September 29, Goldman Sachs analyst Tito Labarta upgraded Itau Unibanco (NYSE:ITUB) stock to Buy from Neutral with a price target of $7, up from $5.40, noting that there was a good risk/return in banks because of the still healthy macro environment and more visibility on industry trends.
Among the hedge funds being tracked by Insider Monkey, Bermuda-based investment firm Orbis Investment Management is a leading shareholder in Itaú Unibanco Holding S.A. (NYSE:ITUB), with 29.8 million shares worth more than $127.8 million.
At the end of the second quarter of 2022, 11 hedge funds in the database of Insider Monkey held stakes worth $397 million in Itau Unibanco (NYSE:ITUB), compared to 19 in the preceding quarter worth $945 million.
7. Daqo New Energy Corp. (NYSE:DQ)
Number of Hedge Fund Holders: 16
Daqo New Energy Corp. (NYSE:DQ) manufactures and sells polysilicon to photovoltaic products in the People’s Republic of China. It is one of the premier emerging market stocks to invest in. On October 18, XinjiangDaqo and Inner Mongolia Daqo, subsidiaries of Daqo New Energy, announced that they had signed a five-year high purity polysilicon supply pact with a leading solar manufacturer company in China. The actual prices will be negotiated by the companies later.
At the end of the second quarter of 2022, 16 hedge funds in the database of Insider Monkey held stakes worth $331 million in Daqo New Energy Corp. (NYSE:DQ), compared to 18 the preceding quarter worth $128 million.
6. AXIS Capital Holdings Limited (NYSE:AXS)
Number of Hedge Fund Holders: 16
AXIS Capital Holdings Limited (NYSE:AXS) provides various specialty insurance and reinsurance products worldwide. It is one of the important emerging market stocks to invest in. On October 14, AXIS Capital became the first insurer in North America to adopt a policy specifying that it will not underwrite new projects without Free, Prior, and Informed Consent. This has set the best global practices for insurer policies on indigenous rights.
At the end of the second quarter of 2022, 16 hedge funds in the database of Insider Monkey held stakes worth $570.7 million in AXIS Capital Holdings Limited (NYSE:AXS), compared to 23 in the preceding quarter worth $689 million.
Alongside Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Baidu, Inc. (NASDAQ:BIDU), and Vale S.A. (NYSE:VALE), AXIS Capital Holdings Limited (NYSE:AXS) is one of the best emerging market stocks to buy now.
5. TAL Education Group (NYSE:TAL)
Number of Hedge Fund Holders: 17
TAL Education Group (NYSE:TAL) provides K-12 after-school tutoring services in the People’s Republic of China. It is one of the best emerging market stocks to invest in. On July 29, the company posted earnings for the first fiscal quarter, reporting a revenue of $224 million. At the end of the second quarter of 2022, 17 hedge funds in the database of Insider Monkey held stakes worth $116 million in TAL Education Group (NYSE:TAL), compared to 14 in the previous quarter worth $76.8 million.
In its Q4 2021 investor letter, TAO Value, an asset management firm, highlighted a few stocks and TAL Education Group (NYSE:TAL) was one of them. Here is what the fund said:
“Looking at the value destruction, TAL Education (TAL) is one of the most painful losses. Although the company is part of the “Mindful Compounder” bucket, it impaired by 95%. If anything, it is heavy price paid for learning that stock returns are driven by more than business and market factors, but also societal factors. I personally think having 4 out of the 5 top value destructions being recently started position in Chinese stocks is a bit biased, as the market may have overacted the most to anything China-related recently.”
4. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holders: 27
Vale S.A. (NYSE:VALE) produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking. It is one of the elite emerging market stocks to invest in. On October 13, Vale revealed its official first phase of its C$945 million Copper Cliff Complex South Mine Project. This will double the ore production at the Ontario mine. According to the company, phase 1 will supply low carbon nickel and other critical minerals.
On October 5, Deutsche Bank analyst Liam Fitzpatrick maintained a Hold rating on Vale (NYSE:VALE) stock and lowered the price target to $19 from $20, noting that the reduced target prices and earnings estimates in metals and mining reflect weakening demand and macro risks.
At the end of the second quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Vale S.A. (NYSE:VALE), compared to 27 in the previous quarter worth $2.4 billion.
3. Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 29
Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) produces and distributes specialty plant nutrients, iodine, and its derivatives, lithium and its derivatives, potassium chloride and sulfate, industrial chemicals, and other products and services. It is one of the top emerging market stocks to invest in. On October 13, the pharmaceutical diagnostic business of GE Healthcare unveiled a long term agreement with Sociedad Química y Minera de Chile to secure its supply of iodine and Computed Tomography procedures globally.
On October 4, Citi analyst PJ Juvekar maintained a Buy rating on Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) stock and lowered the price target to $123 from $126, noting that the earnings estimates for the firm in 2023 remain below the Street and consensus estimates, and need to come down further.
At the end of the second quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $658.6 million in Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), compared to 28 the preceding quarter worth $493 million.
2. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 45
Baidu, Inc. (NASDAQ:BIDU) offers internet search services in China. It is one of the premier emerging market stocks to invest in. On October 17, Baidu announced that it has received permission from regional authorities of Southern Chinese cities of Guangzhou and Shenzhen to provide high mapping technologies to their automakers to enable advanced driver assistance systems on production vehicles.
On October 17, Barclays analyst Jiong Shao maintained an Overweight rating on Baidu, Inc. (NASDAQ:BIDU) stock and lowered the price target to $146 from $235, noting that cost control remains a key focus ahead of the Q3 results.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Ariel Investment is a leading shareholder in Baidu, Inc. (NASDAQ:BIDU), with 2.6 million shares worth more than $393 million.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Baidu, Inc. (NASDAQ:BIDU) was one of them. Here is what the fund said:
“Baidu, Inc. (NASDAQ:BIDU), a leading Chinese artificial intelligence company, contributed to performance in the second quarter due to an improving outlook for its mobile ecosystem, continued market share gains in cloud computing, solid progress in autonomous vehicle development, and improving operational efficiency. We see significant upside for Baidu, given its strong competitive position across several of China’s key growth industries.”
1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 72
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, tests, and sells integrated circuits and other semiconductor devices. It is one of the major emerging market stocks to invest in. On October 19, the chairman of Taiwan Semiconductor said that rising Taiwan-China and US-China tensions have brought more serious challenges for the semiconductor industry. On October 13, Taiwan Semiconductor said it had cut its capital expenditure 10% this year.
At the end of the second quarter of 2022, 72 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), compared to 81 in the preceding quarter worth $10 billion.
In its Q2 2022 investor letter, Mercator International Opportunity fund, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was one of them. Here is what the fund said:
“Another example of this buyers’ strike is Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) (1.81%), down 40% from its high and trading at less than 15 times forward earnings. When TSM announced better-than-expected earnings growth of 67% in the second quarter with no slowdown in sight, the stock barely gained a few percentage points. No matter how good the news, buyers are not showing up. Yet.”
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Disclosure. None. 12 Best Emerging Market Stocks to Buy Now is originally published on Insider Monkey.
