11 Emerging-Markets Stocks Showing Signs of Life

Emerging-markets stocks have broadly struggled in 2020, but like their U.S. counterparts, they're showing plenty of heart now.

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Emerging-markets stocks weren't exactly enjoying a good run before the COVID-19 pandemic wrecked the global economy. And months of lockdowns and a massive decline in economic activity certainly haven't helped much.

Apart from lacking adequate health systems, most emerging markets have minimal safety nets, and a large segment of the economy is informal. The can't afford to get sick, and they certainly can't afford to go to work.

Developing economies are more sensitive to commodity prices and trade flows than most of their developed peers, too. So, a major drop in demand from the United States and other importers tends to hit these countries particularly hard.

"While there isn't a single country in the world that has avoided economic upheaval during the COVID-19 pandemic, resource-heavy economies in the Middle East, Asia and Latin America have been hit particularly hard," says Amir Hekmati, fund manager for portfolio consulting firm TradeFlow and a geopolitical risk analyst for the Middle East and North Africa region. "We're only now beginning to see the full extent of the damage showing up in the economic releases."

Emerging-markets stocks have been a graveyard for capital. This isn't a recent phenomenon, either. As Michael Gayed, manager of the ATAC Rotation Fund (ATACX) and editor of the Lead-Lag Report, explains, "By far and away the most frustrating investment thesis of the past decade has been betting on anything but U.S. equities, and particularly positioning long into emerging markets. Cheap valuations simply haven't translated into price momentum."

All the same, emerging-markets stocks have been showing signs of life. Thanks to a 32% run off the March bottom, the iShares MSCI Emerging Markets ETF (EEM) is just 14% away from a new 52-week high. And given the disparity in valuations, that run might continue. Emerging-markets stocks collectively trade at a cyclically adjusted price/earnings ratio (CAPE) of 13.7, according to Star Capital. By comparison, the United States market trades at a CAPE of 28.3 and developed markets as a whole trade at a CAPE of 22.6.

Today, we're going to take a look at 11 emerging-markets stocks currently trending higher that might have a lot farther to run.

Charles Lewis Sizemore, CFA
Contributing Writer, Kiplinger.com

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.