Usually, it makes sense to focus on ideas that are sourced right here in the U.S. As many experts have stated, you invest in what you know best. However, that doesn’t mean you should never go abroad with emerging market stocks. In certain circumstances, these higher-risk ideas may make sense, especially if you’re looking for greater rewards.
That leads to the primary reason why investors consider emerging market stocks: higher return potential. While the U.S. overall offers the strongest ideas, if you’re looking for potentially astounding returns, enterprises listed in developing nations just might provide the goods. Here, these companies align with the concept of the law of small numbers.
When you’re in a mature market such as the U.S., it’s difficult to extract robust growth. However, in a smaller arena, the upside could be tremendous. Of course, the downside is that this dynamic works the other way too. If circumstances fail to materialize, the sector could get ugly.
Again, it’s high risk, high reward. If you can handle the heat, these emerging market stocks could be right for your portfolio.
Sea (SE)
Based in Singapore, Sea (NYSE:SE) falls under the consumer cyclical space, particularly focusing on internet retail. Per its public profile, the company along with its subsidiaries engages in digital entertainment, e-commerce and financial technology (fintech)-related services. Its main market is Southeast Asia, the rest of Asia and Latin America.
Fundamentally, Sea is an attractive proposition for speculative wagers because of the forecasts tied to Southeast Asia’s internet economy. Per Statista, the sector reached a valuation of $218 billion last year. By 2025, the ecosystem may expand to $295 billion. Eventually, the arena could become a $1 trillion economy, which is why so many are interested in SE stock.
Now, I’m not going to tell you a bunch of fairy tales. Compared to the peak reached in late 2021, SE stock fell down hard. However, since the beginning of this year, the bulls have attempted a comeback. To be sure, it looks very enticing.
For fiscal 2024, covering experts are anticipating 80% year-over-year growth in earnings per share to 70 cents. Further, the top line could hit $15.39 billion, up 17.8% from the prior year. Keep SE on your radar for emerging market stocks.
Baidu (BIDU)
China’s Baidu (NASDAQ:BIDU) might seem like an inappropriate entity to put on a list of emerging market stocks. With the Chinese enjoying the world’s second-biggest economy, calling the sector emerging seems a bit rude. However, the experts agree that China is still classified as such. With that technicality out of the way, BIDU should be on your watch list.
Falling under the communication services sector, Baidu is a powerhouse in China’s internet content and information space. Per its corporate profile, Baidu primarily runs as an internet search provider. It also offers myriad other services tied to the broader consumer economy. Notably, it has ventured heavily into artificial intelligence, particularly with Ernie, a conversational AI bot.
Despite tremendous relevancies, Baidu is underappreciated. According to Gurufocus, shares trade at only 9.47X forward earnings, well below the sector median of 21.23X. The company also trades at a relatively modest revenue multiple of 1.77X (the sector median is 1.91X).
Notably, the most optimistic analysts are looking for EPS of $13.17, which would be up 15.3% YOY. Also, the blue-sky sales target is $20.76 billion, an improvement over last year’s $18.95 billion.
VinFast Auto (VFS)
Based in Vietnam, VinFast Auto (NASDAQ:VFS) is only for the most adventurous investors of emerging market stocks. Operating in the auto manufacturing space, VinFast specializes in electric vehicles. It’s also deeply involved in the broader electrification space, providing e-scooters and e-buses. Aside from its home market, the company provides its products in the U.S. and Canada.
Naturally, VFS stock has attracted the most attention stateside for its EVs. However, that’s also where the greatest risks lie. Selling e-scooters makes sense as a last-mile solution. They’re fun, convenient and relatively affordable. The last attribute, unfortunately, doesn’t quite apply to EVs. As a result, legacy automakers have begun scaling back their electrification ambitions.
Still, what’s appealing about VFS is the analysts’ endorsements. Since February of this year, VFS features a unanimous buy rating. From the most recent two ratings, the average price target stands at $6.50, which implies robust growth. So far, Daniel Ives of Wedbush is the most optimistic with a $12 price target.
Analysts overall are looking for fiscal 2024 revenue to hit $2.56 billion. If so, that would be more than double last year’s print of $1.2 billion.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
