According to the report, Emerging Markets: On the Cusp of a Renaissance published by Lazard Asset Management on October 28, emerging markets are home to 80% of the global population and are on the brink of significant growth, with nearly 2 billion people expected to integrate into their formal economies over the next decade.
Globalization has played a transformative role in improving education, employment, health, and wealth in these markets, creating a promising outlook for economic expansion and earnings growth. Economic and population growth are surging in emerging markets while stagnating or declining in developed economies. This divergence offers investors opportunities to diversify equity and fixed-income portfolios while mitigating risks. Over the past five years, significant outflows from emerging markets have created a fertile landscape for active investment strategies.
Central banks in emerging markets, particularly in Latin America and Eastern Europe, are leading the way in monetary policy innovation. Having raised interest rates during the global inflationary surge of 2021–2022, these regions are now easing rates ahead of their developed counterparts. This proactive approach, combined with the Federal Reserve’s anticipated easing cycle, is expected to bolster emerging market assets by stabilizing local currencies and supporting economic growth.
Read Also: 12 Best Stocks to Invest in for the Next 3 Months and Top 8 Stocks To Buy In 8 Different Sectors for the Next 3 Months.
Emerging markets are among the most undervalued and under-allocated asset classes globally. Despite positive underlying fundamentals, these markets are trading at significant discounts, offering investors a chance to access growth at favorable valuations. Moreover, global investors currently hold a disproportionately low allocation to emerging markets. A reversion to the 20-year average allocation of 8.4% would result in inflows of approximately $910 billion, equivalent to 58% of current assets under management. This influx of capital could serve as a catalyst for long-term appreciation.
As experienced active investors, Lazard Asset Management is focusing on identifying companies with enduring competitive advantages or those poised to develop them. The firm is confident that emerging markets are positioned to deliver strong growth and attractive returns, making them a vital component of any well-diversified investment portfolio. With that in context, let’s take a look at the 7 best emerging markets stocks to buy now.
Stocks
Our Methodology
To come up with the 7 best emerging markets stocks to buy now, we have used Finviz and Yahoo Finance stock screeners to identify stocks of companies that are based in different emerging market countries. We then used Insider Monkey’s Hedge Fund database to rank the 7 stocks according to the largest number of hedge fund holders, which was taken from the database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of hedge fund sentiment, as of the third quarter.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Emerging Markets Stocks To Buy Now
7. LATAM Airlines Group S.A. (NYSE:LTM)
Number of Hedge Fund Holders: 12
Country: Chile
LATAM Airlines Group S.A. (NYSE:LTM) is the largest airline in Latin America, operating in both passenger and cargo segments. The company serves a vast network of destinations across South America, North America, Europe, and Oceania. The airline serves 149 destinations in 26 countries and cargo destinations in 31 countries.
On November 6, LATAM Airlines Group S.A. (NYSE:LTM) announced financial results for the third quarter ending September 30. The airline’s revenue revenue increased 7.6% year over year to $3.28 billion compared to the same period of 2023, driven by a 15.1% growth in passenger operations. This growth is expected to continue, with the company projecting capacity growth of 15% to 16% for the full year 2024.
LATAM is taking proactive steps to drive growth and profitability by reducing costs and restructuring its debt. On October, 1 the company announced successful debt refinancing to strengthen its capital structure, in which the airline secured a significantly lower interest rate, and is projected to reduce interest payments by nearly $120 million in 2025. As of September 30, LATAM Airlines Group S.A. (NYSE:LTM) has a liquidity cash position of approximately $3.6 billion, which makes the company well-equipped to invest in growth initiatives and expand its operations.
6. Credicorp Ltd. (NYSE:BAP)
Number of Hedge Fund Holders: 20
Country: Peru
Credicorp Ltd. (NYSE:BAP) is a leading financial services company in Peru, offering a wide range of banking, insurance, and investment management services to individuals, small and medium-sized enterprises (SMEs), and corporate clients. The company’s banking segment offers a range of financial products and services, including loans, deposits, and payment solutions in Peru, Chile, Colombia, Bolivia, and Panama.
Credicorp Ltd. (NYSE:BAP) aims to continue expanding its digital wallet, Yape, with a goal of reaching 16.5 million active users by 2026, building on the momentum of its recent growth. To achieve this, the company plans to invest in further developing Yape’s features and services, enhancing user experience, and increasing its market penetration in Peru and other countries. In Q3, Yape’s active users reached 13 million.
Additionally, on November 1, Credicorp Ltd.’s (NYSE:BAP) General and Life Insurance businesses, Pacifico Seguros announced the acquisition of the remaining 50% stake in Empresas Banmedica, a move that will give Credicorp Ltd. (NYSE:BAP) full ownership of the private medical insurance business. The acquisition is a strategic move for Credicorp Ltd. (NYSE:BAP), as it will allow the company to expand its presence in the private medical insurance market and improve its ability to provide access to healthcare and insurance services.
5. Banco Bradesco S.A. (NYSE:BBD)
Number of Hedge Fund Holders: 22
Country: Brazil
Banco Bradesco S.A. (NYSE:BBD) is one of Brazil’s largest banks, offering a comprehensive range of financial services, including loans, insurance, and asset management. The bank generates income through interest on loans, insurance premiums, and transaction fees. To drive growth, Banco Bradesco S.A. (NYSE:BBD) is investing heavily in digital banking platforms and expanding its insurance and wealth management segments.
Banco Bradesco S.A.’s (NYSE:BBD) growth trajectory is driven by its expanding client base, improved profitability, and strategic initiatives. In Q3, the bank’s net income increased 11% to $868.01 million, an 11% growth compared to the previous quarter. The bank’s loan portfolio grew by 3.5% quarter-on-quarter, with a notable 17% growth in small and medium-sized enterprises (SMEs) lending. Additionally, the bank added 1.8 million new clients.
Banco Bradesco S.A. (NYSE:BBD) emphasizes customer-centricity, ensuring its actions revolve around client needs. With extensive nationwide coverage and strategic international locations, the bank has streamlined its organizational structure for quicker decision-making and enhanced client support. Additionally, it has adapted its service model through a broad distribution network. Furthermore, the bank is launching a new segment for high-net-worth individuals, which is expected to enhance its service offerings and attract more affluent clients.
4. Gold Fields Limited (NYSE:GFI)
Number of Hedge Fund Holders: 22
Country: South Africa
Gold Fields Limited (NYSE:GFI) is a global gold-producing company that operates approximately nine mines spread across Australia, Canada, South Africa, Ghana, Chile, and Peru. The company is also involved in copper and silver and other related activities, including exploration, extraction, processing, and smelting. The company’s Windfall Project in Canada is recognized as one of the largest gold deposits in Canada and among the top 10 globally due to its high-grade gold content.
Gold Fields Limited (NYSE:GFI) is actively expanding its portfolio through strategic acquisitions to drive long-term growth. On October 28, the company announced the completion of its acquisition of Osisko Mining, a Canadian company focused exploration, and development of gold, silver, and diamond mines. The deal, valued at $1.57 billion in an all-cash transaction, will give Gold Fields Limited (NYSE:GFI) full control of the Windfall project in Quebec, Canada.
Despite the substantial investment, Gold Fields Limited (NYSE:GFI) has maintained a strong financial position and preserved its investment-grade credit rating. The company expects its financial position to strengthen further, driven by robust cash flow growth anticipated for the remainder of 2024 and into 2025 as production ramps up across several key operations.
Gold Fields CEO Mike Fraser highlighted the significance of the acquisition, emphasizing the exceptional quality and scale of the Windfall deposit. He described the transaction as a pivotal step in the company’s strategy to enhance the quality of its portfolio and secure long-term growth opportunities.
3. Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX)
Number of Hedge Fund Holders: 23
Country: Mexico
Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) commonly known as FEMSA, is a Mexican multinational beverage and retail company that operates various businesses across Latin America, Europe, and Asia. Fomento Económico Mexicano, S.A.B. de C.V.’s (NYSE:FMX) convenience store chain, OXXO, is one of the largest in Latin America, with over 20,000 stores across Mexico, Latin America, and Asia. The company’s health division operates pharmacies and provides healthcare services in several countries, including Mexico, Colombia, and Chile.
On October 28, Fomento Económico Mexicano, S.A.B. de C.V.’s (NYSE:FMX) announced financial results for Q3. The company’s revenues increased 8.3%, whereas income from operations increased 14.6% compared to the same quarter in the previous year. OXXO’s same-store sales grew 4.8%, driven by a steady growth in its store base and a gross margin expansion of 300 basis points to 44.2%.
During the third quarter, Fomento Económico Mexicano, S.A.B. de C.V.’s (NYSE:FMX) added 367 net new stores, with 273 in Mexico and 94 in South America, including 39 new stores in Brazil. In the last nine months, the company has added 1,266 net new stores with 961 openings in Mexico and 305 in South America, including 124 new stores in Brazil.
Fomento Económico Mexicano, S.A.B. de C.V.’s (NYSE:FMX) plans to continue expanding its store base, with a preliminary target of 1,100 net new stores in Mexico in 2025, representing a growth rate of over 4%. The company also plans to expand its presence in the Brazilian market, where it has a joint venture to operate convenience stores. The company plans to increase its store base in Brazil by approximately 20% in the next year.
2. HDFC Bank Limited (NYSE:HDB)
Number of Hedge Fund Holders: 41
Country: India
HDFC Bank Limited (NYSE:HDB) is one of India’s leading private sector banks that provides a wide range of financial services to its customers. The bank operates in various segments, including retail banking, wholesale banking, and treasury operations. HDFC Bank Limited (NYSE:HDB) has a strong presence in the Indian banking industry and has established itself as a trusted financial institution.
On October 30, Reuters reported that HDB Financial Services, the non-banking lending unit of HDFC Bank Limited (NYSE:HDB) has filed for an initial public offering (IPO) of up to $1.49 billion. HDB Financial Services generates revenue by providing a range of financial products and services to its clients, including secured and unsecured loans, consumer loans, business loans, and microloans. With over 1,680 branches across India, the company has built a vast network to cater to its diverse customer base. As of September 30, HDB’s gross loan book stood at $11.67 billion, reflecting a growth of nearly 21% in just two years.
This impressive growth trajectory is a testament to the company’s ability to tap into the vast and growing demand for financial services in India. The company’s client base is diverse, ranging from individuals seeking consumer loans to businesses requiring working capital. To further drive growth, HDB Financial Services aims to utilize the IPO proceeds to enhance its capital requirements, including onward lending and regulatory compliance. This move will enable the company to expand its loan book, increase its market share, and capitalize on the growing demand for financial services in India.
1. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 115
Country: China
Alibaba Group Holding Limited (NYSE:BABA) is a leading Chinese e-commerce and technology company that derives revenue from online retail and wholesale platforms, digital media, and logistics. The company owns a diverse range of online marketplaces, including Taobao, Tmall, AliExpress, Alibaba.com, Lazada, Trendyol, 1688, and Idle Fish. Additionally, the company is a major player in the artificial intelligence (AI) sector, offering a comprehensive suite of tools and services for enterprises and developers through Alibaba Cloud’s AI Platform.
Alibaba Group Holding Limited’s (NYSE:BABA) e-commerce business is poised for continued growth, driven by its expanding market access and enhanced supply chain integration. On November 21, Alibaba Group Holding Limited (NYSE:BABA) announced the formation of the new E-Commerce Business Group, which integrates the company’s e-commerce businesses under one unified umbrella. The company’s new business group structure will enable merchants to better reach new buyers and expand their businesses globally. By leveraging its resources Alibaba Group Holding Limited (NYSE:BABA) aims to drive significant synergies across global supply chains, resulting in faster and more competitive delivery options for consumers.
Alibaba Cloud’s Platform is also a significant growth driver, with a 37% market share in China, according to DBS Bank. On November 18, the Financial Times reported that the company is recruiting top AI talent to build an AI team in the San Francisco Bay Area. Alibaba Cloud also benefits from a favorable landscape, with the Chinese government supporting its adoption as part of a national digital strategy, driven by rising internet penetration, the expansion of 5G networks, and government initiatives that fuel cloud demand.
While we acknowledge the potential of Alibaba Group Holding Limited (NYSE:BABA) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. 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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