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3 Emerging Market Stocks to Ride the Next Bull Run
Across all stock sectors and subtypes, few were hit harder this year than emerging market stocks. The iShares Emerging Market ETF (NYSEARCA:EEM) dropped…
Across all stock sectors and subtypes, few were hit harder this year than emerging market stocks. The iShares Emerging Market ETF (NYSEARCA:EEM) dropped nearly 50% between its post-pandemic high and October 2022 before squeaking out a meager 3% return this year.
But we seem to be entering a new era as the Fed signals rate cuts faster and earlier than expected. The fast and furious pivot could send emerging market stocks soaring, as they tend to do best when rates are low and speculative interest is high. For example, the MSCI Emerging Markets Index returned 18.31% in 2020, roughly matching the S&P 500 but offering geographic diversification to boot.
If you’re wary of the handful of stocks propping up large-caps or want to diversify your assets for 2024, these emerging market stocks for the next bull run stand as perfect picks.
Taiwan Semiconductor (TSM)
Source: ToyW / Shutterstock
You’ve been living under a rock if you haven’t yet heard of Taiwan Semiconductor (NYSE:TSM). TSM is at the top of most analysts’ lists when it comes to innovative chipmaking that powers so many of today’s electronics. At the same time, though U.S. legislators are pushing to kickstart America’s semiconductor industry to smooth out geopolitical risk, bureaucratic sluggishness ensures TSM will remain a top U.S. supplier for the immediate future.
TSM is also a global favorite, as countries like Japan flood the company with capital. In Japan’s case, they committed part of a $10 billion aid package to developing in-country semiconductor plants. And, of course, as long as artificial intelligence trends maintain their momentum, TSM stands to gain most among emerging market stocks.
The company’s financials are beyond reproach, with limited debt and a massive 40% net margin. It’s this financial prudence that kept TSM stable, compared to other emerging market stocks, throughout the past years’ turbulence. TSM also offers a small dividend, with its yield currently sitting at 1.76%.
Vale SA (VALE)
Source: Shutterstock
Vale SA (NYSE:VALE), a nickel mining stock, stands to gain from renewed interest in emerging market stocks and ongoing electric vehicle adoption. Nickel is a core component for EV batteries, and Vale (though on the smaller side) maintains strategic partnerships with manufacturers like General Motors (NYSE:GM). In this case, GM is leveraging Vale’s mining assets to source enough nickel to produce as many as 350,000 EVs annually.
Batteries have been the sticking point for many firms racing to push EVs off the production line, and Vale could prove a game changer as companies begin building U.S.-based battery plants that source nickel and other metals internationally. That’s evident as, beyond GM, Vale provides Tesla (NASDAQ:TSLA) and Ford (NYSE:F) with nickel for their battery endeavors.
Vale’s financials are surprisingly stable, considering mining tends to be capital-intensive, debt-heavy, and offering slim margins. Vale’s net margin sits at 22%, and the company offers a whopping 13.9% total yield between dividends and share buybacks.
Infosys Ltd (INFY)
Source: AjayTvm / Shutterstock.com
Infosys Ltd (NYSE:INFY) captures another popular trend in emerging markets: outsourced IT services. The India-based company services U.S. companies and generates more than 50% of its revenue from these arrangements. As remote work reigns supreme, IT and similar outsourcing initiatives are surging. The industry, worth $1,250 billion in 2022, should hit $1,364 billion this year. Infosys stands out among emerging market stocks as a leader in this sector, and investors capitalizing on a rapidly growing Indian economy and shifting work trends should pay attention to Infosys.
Infosys’ industry dominance is its strongest selling point, as U.S.-based companies don’t typically switch rapidly once they select an outsourced IT service provider. That’s evident from the company’s low attrition rate, around 15%, which indicates companies are in it for the long haul when they sign with Infosys.
Infosys offers investors a small dividend, yielding 2.46%, but its real value stands in its rapid growth. The company boasts a 9.43% average annual revenue growth over the past ten years, with net income growing 5% annually.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.
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