“Emerging markets performance this year so far has been a disaster,” says Russ Koesterich, Chief Investment Strategist for BlackRock. However, he still sees these countries as “a long-term value investment.” That said, over the next six months or so he suggests investors “selectively trim” this exposure. Consider shifting into The Western Union Company (NYSE:WU), ABB Ltd (ADR) (NYSE:ABB), and Tupperware Brands Corporation (NYSE:TUP) to keep a toe in the water.
Still a Good Play
Jeff Shen, the head of Emerging Markets for BlackRock, explains that “EMs are backed by more attractive fundamentals relative to their developed world counterparts. These include stronger economic growth, more robust company growth and generally favorable demographics (i.e., young populations that are working, earning and spending).” That said, markets are driven by emotion over short periods of time, not fundamentals.
That’s why Koesterich is concerned about emerging markets in the second half. In the first half, “Emerging markets suffered amid investor concerns about the implications of a possible Fed tapering later this year.” That concern isn’t going away any time soon. Investors can stay in emerging markets, however, without actually investing directly in them. Here are three solid options:
The Western Union Company (NYSE:WU) provides money transfer services in over 200 countries. Only 10% of its stores are located within The United States. It touches U.S. markets in that many of the company’s patrons live here and use The Western Union Company (NYSE:WU) to send money back home. That’s the business that most people think of when they hear the company’s name.
However, The Western Union Company (NYSE:WU) also allows customers to send money within the 200 countries it serves. And it is working to provide bank-like services in emerging markets since many of its customers don’t have banking relationships. With a strong brand name and an existing store base, the money transfer specialist should be able to branch out with ease.
The company’s revenues and earnings fell during the 2007 to 2009 recession. Sales picked up again in 2010 and have been heading higher. Troubles in the key U.S./Mexico business, however, took earnings lower in 2012 and should be a drag on both the top- and bottom-lines over the next year or so. The shares moved lower on the news and haven’t fully recovered. So now could be a good time to buy this emerging markets specialist and its around 2.9% yield.
Emerging markets make up about half of ABB Ltd (ADR) (NYSE:ABB)’s business. That’s 17 percentage points higher than industrial giant General Electric Company (NYSE:GE). Although ABB Ltd (ADR) (NYSE:ABB) isn’t nearly as diverse a company as General Electric Company (NYSE:GE), it has a key focus on helping customers use power more efficiently. That’s an increasingly in-demand offering.