Though it is a tough challenge to pick up one particular stock from so many trading in the market, it is far easier, when compared to the task of choosing the best stocks from emerging markets like China, Brazil, Russia or India. The economic growth in these countries and their political conditions are quite difficult to understand. Investors need to be very careful while choosing stocks from these emerging markets. Given the economic growth that some of these countries are expected to witness this year and in the future, the following stocks come up as best bets:
Importance of India’s rapid growth
The Indian economy has been growing at a rapid pace in the recent past. The average growth per year has been close to 7.5%. It is expected that this growth will continue until 2020 at least. One of the sectors that will benefit hugely from this growth is the pharmaceutical sector. This is why Dr. Reddy's Laboratories (RDY, Financial) is considered one of the top emerging market stocks for 2015. Dr. Reddy’s earns about 40% of its income from the North American market. The economic growth in India rubs off on the performance of Dr. Reddy’s Labs in the U.S. as well. With the launch of innovative drugs, the Indian pharmaceutical giant had reported an increase in sales of 7% during 2014 from last year, to show $579 million. Gross profits had gone up by 8% during 2014 and the EPS had gone up to $0.54. The stock movement of the company for the last few months is seen below:
China’s Google
When it comes to search engines, there is only one name that comes to our mind and that is Google (GOOG, Financial). However there is one more company that has managed to keep even a search engine giant like Google in control. It is Baidu (BIDU, Financial), the search engine market leader from China. The immense potential and consistent growth of Baidu kept Google’s performance well under control. Baidu enjoyed a monopoly in the Chinese search engine market, which witnessed a threat only when another local search engine company, Qihoo 360 (QIHU, Financial), started becoming popular.
However, Baidu has come back to its original dominant form in the last few years and has been enjoying consistent increases in earnings and sales. Baidu understood the potential of the mobile sector very well and devised all sorts of strategies to gain deep inroads into the mobile search traffic sector as well and earn money from it. Share prices have increased almost threefold in the last two years. Baidu has millions of customers in the ad segment and in 2014, revenues from ad services alone increased around four times from the figures for 2013. The mobile sector is indeed one with great potential and with the ad services set to grow phenomenally in the coming days Baidu is here to stay for some more years at least. The stock movement of the company for the last few months is seen here:
Returns outweighing risks
In spite of the country reeling under severe economic recession, this company has managed to figure in the list of emerging market stocks with high potential. The country in question here is Russia and the company that we are talking about is Yandex (YNDX, Financial). This is the search engine company of Russia and currently enjoys 60% of market share there. The shares are currently trading at a heavy discount because of the oil price crash and slump of the rubble. The forward P/E is just about 14 and hence can be bought right now by investors looking for long-term gains.
Yandex could gain immensely if Russia, as part of strict localiation, bans the use of Google in the country. In order to avoid severe stoppages, Russia is currently in the process of localizing its entire system. Payment processing companies were targeted first and then the laws asked the technology companies to abide by them. If Google agrees to this localization, it would simply mean that it would not be functional anymore in Russia, making Yandex the undisputed leader in the search engine market there. The share price trend of Yandex can be seen below:
Conclusion
With the emerging markets throwing some surprises in the stock market every now and then, investors need to keep an eye on the economic development of other countries as well. The above stocks that are from the rising economies do come with an element of risk in them; however they are worth the investment that is made in them because these are high-potential stocks that have a futuristic approach.
