In this article, we will take a detailed look at the best emerging markets stocks to buy according to hedge funds.
Emerging markets stocks are shares of companies based in developing countries – think Brazil, India, China, or South Africa – that are rapidly industrializing and growing their economies. Unlike the familiar and more predictable world of US stocks, emerging markets offer something quite different: higher growth potential coupled with greater volatility, influenced by unique local dynamics such as political shifts, currency swings, and evolving regulations. Why venture into these turbulent waters? Because with higher risk comes the potential for higher rewards. These markets often grow faster than mature economies, making them especially attractive if you’re looking to diversify beyond the stability (and sometimes slower pace) of US equities. Also, exposure to the best emerging markets stocks would not only boost the return profile of a portfolio, but also make it less volatile through diversification – many emerging markets exhibit little to no sensitivity to the state of the economy in the US, meaning that their national economy could continue to grow even when the US is in a recession.
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Timing matters, especially when diving into emerging markets stocks. Investing in these companies makes the most sense when global economic conditions are improving, investor sentiment is optimistic, and local political or financial uncertainties are settling down. It’s particularly appealing if you’re a patient investor who can withstand short-term volatility for potentially bigger long-term gains. Additionally, when valuations in developed markets like the US are stretched and growth appears limited, emerging markets stocks can offer a refreshing alternative, giving your portfolio both growth exposure and geographical diversification.
The current tendencies we see in the global markets are highly suggestive that a potential rotation from US stocks to emerging markets stocks would be the right move to make. Despite the US market being in correction mode, valuations still appear stretched, as the whole market trades at a forward P/E above 20x, significantly above the historical average, which is around the mid-teens. This is the first factor that points toward the possibility that US stock market returns will be lower until the end of the decade due to the impact of declining valuations (or, call it a return to more normal valuations). Second, the new Trump 2.0 administration introduced a lot of noise into the US economy – the Atlanta Fed has already lowered its GDP growth estimates for the following quarters as a result of significant cuts in public spending as well as the tariff threats negatively impacting the private spending outlook. This expected economic slowdown is exclusive to the US market, while emerging markets may continue to grow their economies at a usual pace.
Finally, the potential impact of the upcoming reciprocal tariffs on April 2 is still not completely understood by the markets. What is certain is that the tariff threats have already caused inflation in some products, such as construction materials, copper, and other commodities, as businesses rushed to stockpile raw materials and inventories at cheaper prices before tariffs were enforced. Higher inflation, especially in core products like housing, is not good for the economy, as it pressures consumers and erodes their spending power. Higher inflation may also reduce the chances that the FED will lower interest rates any time soon, which is another impediment to economic growth. The key takeaway for readers is that the aforementioned headwinds and threats are mostly exclusive to the US market, while most of the emerging markets are likely to be impacted much less. In this context, we believe it is worth considering gaining some exposure to the best emerging markets stocks, which we discuss in this article.
An investment banker making a presentation to a board of directors about emerging markets.
Our Methodology
We shortlisted 20-30 emerging markets stocks that are based in and derive most of their revenue from emerging countries. Then we compared the list with our proprietary database of hedge funds’ ownership and included in the article the top 10 stocks with the largest number of hedge funds owning the stock as of Q4 2024. All stocks are ranked in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Infosys Limited (NYSE:INFY)
Number of Hedge Fund Holders: 27
Infosys Limited (NYSE:INFY) is a global technology services and consulting firm offering a broad range of services, including business consulting, information technology, and outsourcing solutions across various industries, such as finance, insurance, manufacturing, and more. INFY has developed several digital products and platforms aimed at facilitating digital transformation for its clients. With operations spanning over 50 countries, INFY maintains a significant presence in emerging markets, particularly in India and other Asian nations.
Infosys Limited (NYSE:INFY) demonstrated strong performance with revenue growth of 1.7% QoQ and 6.1% YoY in constant currency terms. The company achieved significant milestones with an operating margin at 21.3% and a record-high free cash flow of $1.26 billion. Financial services in the US continued strong growth, with a revival observed in European financial services during Q3. The company is strengthening its enterprise AI capabilities through Infosys Topaz, having built 4 small language models and developing over 100 new generative AI agents for client deployment.
Based on its strong performance, Infosys Limited (NYSE:INFY) revised its revenue growth guidance to 4.5% to 5% in constant currency while maintaining an operating margin guidance at 20% to 22%. The company’s headcount grew by over 5,000 sequentially to exceed 323,000 employees worldwide, marking the second consecutive quarter of headcount addition. Large deal wins stood at $2.5 billion, with 63% being net new, and the large deal pipeline has become stronger in Q3. With strong guidance going forward, INFY is one of the best emerging markets stocks to consider.
9. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Fund Holders: 31
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is a Brazilian state-controlled multinational corporation headquartered in Rio de Janeiro. Operating across the oil, natural gas, and energy sectors, PBR specializes in exploration and production, refining, energy generation, and trading. The company is organized into three main segments: Exploration and Production; Refining, Transportation and Marketing; and Gas and Power. With a significant presence in deep and ultra-deep-water exploration, PBR has established itself as a global leader in offshore oil production and is one of the best emerging markets stocks to invest in.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) demonstrated strong financial performance in 2024, generating over BRL 200 million in cash and paying BRL 102 billion in dividends despite lower Brent and diesel crack prices. The company increased investments by 31% to $16 billion and reduced financial debt to its lowest level since 2008. While reporting a Q4 loss of BRL 17 billion due to exchange rate variations, this was purely an accounting event with no impact on cash flow. Operationally, PBR achieved significant milestones, including the start of operations at FPSO Almirante Tamandare in the Buzios field, which has a capacity of 225,000 barrels of oil per day. The Buzios field, being the largest deepwater operations field globally, is expected to produce about 200 million barrels a day by 2030.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)’s refineries operated with the highest operating factor in the last 10 years, with record-breaking production in S10 diesel, their most profitable product. Looking ahead to 2025, management plans to increase production by 100,000 barrels per day and will have three new producing units becoming fully operational throughout the year. The company is also expanding its fleet with 4 range vessels and 8 additional vessels for coasting while maintaining strong environmental commitments, as evidenced by its return to the Dow Jones Sustainability Index.
8. ICICI Bank Limited (NYSE:IBN)
Number of Hedge Fund Holders: 32
ICICI Bank Limited (NYSE:IBN) is a leading private sector bank in India, headquartered in Mumbai. The bank offers a comprehensive range of financial products and services, including retail and corporate banking, investment banking, insurance, and asset management. With a network of over 5,000 branches and 15,000 ATMs across India, IBN serves a vast customer base. The bank has expanded internationally, establishing subsidiaries in the UK and Canada and branches in countries such as the US, Singapore, and Hong Kong. The bank’s primary operations and revenue streams are deeply rooted in the Indian market, providing significant exposure to the emerging market sector.
ICICI Bank Limited (NYSE:IBN) demonstrated strong financial performance with profit before tax excluding treasury growing by 12.8% YoY. The bank’s core operating profit increased by 13.1% YoY to 165.16 billion Rupees, while profit after tax grew by 14.8% YoY to 117.92 billion Rupees. Total deposits showed a healthy growth of 14.1% YoY, with the domestic loan portfolio expanding by 15.1% YoY. The bank maintained strong asset quality with a net NPA ratio of 0.42% and held substantial contingency provisions of 131.00 billion Rupees, representing about 1.0% of total loans.
The capital position of ICICI Bank Limited (NYSE:IBN) remained robust with a CET-1 ratio of 15.93% and a total capital adequacy ratio of 16.60%. The bank continues to focus on risk-calibrated profitable growth through its 360-degree customer-centric approach while maintaining high standards of governance and enhancing delivery capabilities. IBN is on our list of the best emerging markets stocks because it delivers attractive growth across several emerging countries and even managed to outperform the world stock market index in the last 5 years.
7. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holders: 36
Vale S.A. (NYSE:VALE) is a Brazilian multinational mining company and one of the world’s largest producers of iron ore and nickel. Headquartered in Rio de Janeiro, VALE’s operations encompass the extraction and production of iron ore, pellets, nickel, manganese, copper, and coal. The company also manages extensive logistics systems, including railroads, maritime terminals, and ports, facilitating the efficient transportation of its products.
Vale S.A. (NYSE:VALE) delivered a strong operational performance in 2024, achieving its highest iron ore production since 2018 at 328 million tons, exceeding original guidance. The company demonstrated cost efficiency with iron ore C1 cash costs reaching $18.8 per ton in Q4, the lowest level since 2022. VALE successfully completed key projects, including the start-up of Vargem Grande and Capanema ahead of schedule, adding 30 million tons of low-cost production capacity. In base metals, the company achieved its highest copper production since 2020, with Salobo producing approximately 200 kilotons of copper in 2024.
The Board approved $2 billion in dividends and interest on capital, resulting in an annualized 10% yield, along with a new buyback program for up to 3% of outstanding shares. Vale S.A. (NYSE:VALE) also announced the new Carajás initiative, focusing on accelerating the development of critical minerals in one of the world’s best provinces. The company also maintained strong progress on safety and environmental commitments, achieving 57% completion of the Upstream Dams Decharacterization program and expecting no dams at Level 3 by the end of 2025. With such strong momentum and plenty of growth opportunities from new projects, VALE is one of the best emerging markets stocks to buy.
6. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 50
Baidu, Inc. (NASDAQ:BIDU) is a Chinese multinational technology company specializing in internet-related services and AI. Headquartered in Beijing, BIDU operates China’s leading search engine, offering services such as web search, news aggregation, image and video searches, and a user-generated encyclopedia known as Baidu Baike. Beyond its core search business, the company has diversified into AI-driven initiatives, including cloud computing, autonomous driving technology, and conversational AI models like Ernie.
Baidu, Inc. (NASDAQ:BIDU) reported modest YoY growth in core revenue in the latest Q4 2024, reaching RMB 27.7 billion. The AI Cloud division was a standout, with revenue rising 26% compared to the previous year, helping to counterbalance weaker performance in the online marketing segment. Its AI model, ERNIE, continued to gain traction, with daily API usage costs hitting 1.65 billion in December and external API costs surging 178% from the previous quarter. BIDU also made progress in its search business, with AI-generated content now appearing in 22% of search results. In autonomous driving, the Apollo Go service delivered roughly 1.1 million rides in Q4, up 36% YoY, and achieved full driverless operation across the country.
Looking ahead, Baidu, Inc. (NASDAQ:BIDU) anticipates a gradual recovery in advertising revenue, expecting the first half of 2025 to outperform the previous quarter, with further gains in the second half. The company also plans to speed up its share repurchase efforts, having already bought back over $1 billion in stock since the start of 2024. Despite recent short-term sluggishness, the accelerating guidance and exceptional growth momentum in AI makes BIDU one of the best emerging markets stocks to consider.
5. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 79
Nu Holdings Ltd. (NYSE:NU) is a leading digital banking platform in Latin America. Headquartered in São Paulo, Brazil, NU offers a range of financial services, including credit cards, digital accounts, personal loans, life insurance, and investment products, primarily through its mobile app. The company serves over 114 million customers across Brazil, Mexico, and Colombia, focusing on providing accessible and user-friendly financial solutions. With its operations concentrated in these Latin American countries, NU provides significant exposure to emerging markets.
Nu Holdings Ltd. (NYSE:NU) delivered standout results in 2024, with revenue increasing 58% YoY to $11.5 billion, driven by a 23% rise in average revenue per active customer, which reached $10.7. The company saw substantial customer growth, ending the year with 114 million users – an addition of 20.4 million new customers. Active customer growth held strong at 22% YoY. Profitability also improved, with net income nearly doubling to close to $2 billion, translating to an annualized return on equity of 28%. Operational efficiency reached new highs, with the efficiency ratio falling to 29.9%, placing Nu among the most efficient financial services companies globally.
Nu Holdings Ltd. (NYSE:NU) also experienced significant expansion in its core financial operations. Deposits increased by 55% to $28.9 billion, and the interest-earning portfolio grew 75% on a foreign exchange-neutral basis, hitting $11.2 billion. In Mexico, the company surpassed 10 million customers and saw deposits surge by 438% to $4.5 billion. Secured lending also gained traction, growing 615% YoY to reach $1.4 billion, now accounting for 23% of NU’s total lending portfolio. Credit quality remained strong, with performance exceeding industry benchmarks across all risk tiers. Additionally, the company expanded its presence among high-income clients, with the Ultravioleta segment growing 132% compared to the previous year. NU’s exceptional growth story and the still long runway for expansion in Latin America make it one of the best emerging markets stocks to invest in.
4. PDD Holdings Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 85
PDD Holdings Inc. (NASDAQ:PDD) is a multinational commerce group that owns and operates a portfolio of businesses, including the Chinese e-commerce platform Pinduoduo and the international online marketplace Temu. PDD specializes in group purchasing, enabling users to participate in collective buying deals, primarily offering agricultural products and daily necessities. Temu, launched in September 2022, has rapidly expanded into markets such as the United States, offering a wide range of affordable products. PDD ranked 1st on our recent list of 10 Best Chinese Stocks to Buy According to Billionaires.
PDD Holdings Inc. (NASDAQ:PDD) reported a steady financial performance in the Q4 2024, with total revenue rising 24% YoY for the quarter and 59% YoY for the year. The company remained committed to its high-quality development strategy, launching several key initiatives such as a RMB 10 billion fee reduction plan, logistics support for underserved areas, and programs aimed at helping high-quality merchants thrive. These efforts delivered tangible results, with the fee reduction initiative benefiting over 10 million merchants by improving efficiency and lowering operating costs.
PDD Holdings Inc. (NASDAQ:PDD)’s logistics efforts also paid off, driving double-digit growth in order volume and providing free shipping to nearly 100 million consumers in remote regions. As management looks ahead to 2025, it plans to stay focused on enhancing platform quality by further strengthening merchant protection policies, expanding support for top-performing sellers, and increasing access to high-quality goods. However, the management team cautioned that heavy investment in ecosystem development, along with a rapidly evolving external environment and rising competition, may weigh on short-term financial results. With 85 hedge funds owning the stock, PDD ranks 4th on our list of the best emerging markets stocks to buy according to hedge funds.
3. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 86
Sea Limited (NYSE:SE), based in Singapore, is a global consumer internet company operating three primary businesses: Garena, Shopee, and SeaMoney. Garena focuses on digital entertainment, offering online games and developing titles like “Free Fire.” Shopee is an e-commerce platform providing a mobile-centric marketplace with integrated payment and logistics services. SeaMoney offers digital financial services, including mobile wallets and payment processing. SE has a strong presence in emerging markets like Southeast Asia, Taiwan, and Latin America.
Sea Limited (NYSE:SE) delivered a strong performance in 2024, with all three of its core businesses reporting double-digit growth and positive adjusted EBITDA. Shopee, the company’s e-commerce platform, surpassed $100 billion in gross merchandise value (GMV) and processed over 10 billion orders during the year. The digital financial services segment also performed well, generating $2.4 billion in revenue and over $700 million in adjusted EBITDA – both up more than 30% YoY. SE maintained its leadership position across seven Asian countries and Brazil, which makes it one of the best emerging markets stocks to consider now
Sea Limited (NYSE:SE)’s digital entertainment division (Garena), experienced a notable rebound in 2024, driven by the strong performance of Free Fire. The game’s bookings increased by 34% YoY, helping it retain its status as the world’s most-played mobile game by average daily active users. Looking ahead to 2025, management anticipates continued momentum. Shopee’s GMV is expected to grow around 20%, the loan book is projected to expand at an even faster pace, and Garena is forecasted to deliver double-digit growth in both its user base and bookings.
2. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 96
MercadoLibre, Inc. (NASDAQ:MELI) is a leading e-commerce and fintech company, headquartered in Uruguay, operating across 18 Latin American countries, including Brazil, Mexico, and Argentina. Its ecosystem comprises several integrated services: Mercado Libre Marketplace, a platform for buying and selling goods; Mercado Pago, a digital payments solution; Mercado Crédito, offering credit services; Mercado Envios, providing logistics solutions; Mercado Ads, an advertising platform; and Mercado Shops, which enables businesses to create online storefronts.
MercadoLibre, Inc. (NASDAQ:MELI) had an outstanding year in 2024, gaining significant market share in Brazil, Mexico, and Argentina across core areas such as GMV, total payment volume (TPV), credit portfolio, and assets under management. The company achieved key milestones, surpassing 100 million unique buyers on its marketplace and reaching 60 million monthly active users on its FinTech platform. With $21 billion in revenue and over $1 billion in free cash flow, MELI demonstrated its ability to generate strong, profitable growth while continuing to invest in its strategic priorities.
Throughout the year, MercadoLibre, Inc. (NASDAQ:MELI) focused on enhancing its logistics capabilities, opening new fulfillment centers, and expanding its free shipping coverage to improve customer experience. In the credit card business, MELI issued 5.9 million new cards and more than doubled the size of its portfolio. The company’s long-term growth outlook remains strong, supported by low e-commerce penetration in Latin America, rising demand for financial products among underserved populations, and increasing adoption of digital payment solutions among merchants and consumers. For its explosive expansion, MELI is often called “The Amazon of Latin America”, which makes it one of the best emerging markets stocks to invest in.
1. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA), based in China, is a multinational conglomerate operating across e-commerce, retail, internet, and technology sectors. Its core businesses include China Commerce, featuring platforms like Taobao and Tmall; International Commerce, through AliExpress and Lazada; and Local Consumer Services, such as food delivery. The company also runs Cainiao for logistics, Alibaba Cloud for cloud computing services, and digital media platforms like Youku. BABA ranked second on our recent list of 12 Best ADR Stocks to Buy According to Hedge Funds.
Alibaba Group Holding Limited (NYSE:BABA) showed strong momentum across its core businesses in 2024 following a year of transformation, driven by a user-first, AI-powered strategy centered on e-commerce and cloud services. The cloud division posted solid growth, with revenue (excluding Alibaba-consolidated subsidiaries) rising 11%, while AI-related product revenue continued to see triple-digit growth for the sixth straight quarter. In e-commerce, platforms like Taobao and Tmall recorded strong gains in both new users and order volumes, with customer management revenue increasing 9% YoY and VIP memberships growing to 49 million. The international e-commerce segment also maintained healthy growth, supported by greater operational efficiency, and AIDC is on track to report its first profitable quarter in the upcoming fiscal year.
Looking ahead, Alibaba Group Holding Limited (NYSE:BABA) plans to significantly scale up investments over the next three years in three key areas: AI and cloud infrastructure, foundational AI models and native applications, and integrating AI into its existing businesses. The company noted that planned spending in cloud and AI infrastructure will exceed its total investment in this area over the past decade. Financially, BABA remains on solid footing with a strong net cash position and continued efforts to streamline its balance sheet through asset divestitures, share repurchases, and prudent debt management.
Overall, Alibaba Group Holding Limited (NYSE:BABA) ranks first on our list of the 10 best emerging markets stocks to buy according to hedge funds. While we acknowledge the potential of BABA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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