Goldman Sachs Group, Inc. (NYSE:GS) CEO Lloyd Blankfein expects emerging markets to keep expanding. While that growth will come with volatility, it remains an investment opportunity. Intrepid types should consider companies like Avon Products, Inc. (NYSE:AVP) and General Electric Company (NYSE:GE) to take advantage of these opportunities.
While discussing the world’s economic and investment backdrop with a business group in Sydney, Blankfein was recently quoted by Bloomberg as saying, “It is very, very probable and certain that [Brazil, Russia, India and China] will continue growing.” He added that they would “give the world much of its growth.”
However, he also said that this growth will be volatile. For example, he noted that China is in the midst of a shift from growth at any cost to a more controlled and sustainable level of growth. So investors should be ready for something of a rough ride.
Selling Direct
Tupperware Brands Corporation (NYSE:TUP) is doing much better than Avon Products, Inc. (NYSE:AVP) of late. The direct seller of plasticware, kitchenware, and beauty supplies projects that Asia will see the middle class grow from 500 million to 1.7 billion by 2020, powering much of the world’s middle-class growth. South America will pitch in, too, but to a lesser degree.
About 60% of Tupperware’s top line comes from emerging markets. Sales were flat between 2011 and 2012, but that was largely the result of a weak third quarter last year, and recent results suggest that was a one-quarter fluke. Growth and income investors should consider the company, since its shares are trading around all time highs and it has a yield of around 2.9%.
Although recent red ink is unpleasant, Avon Products, Inc. (NYSE:AVP) knows it has problems and is taking steps to fix them. While the shares have moved higher lately, they remain well off of their highs. Investors have low, but improving, expectations of the company. Latin America represents nearly 50% of the business today, with Asia comprising another 10% or so. That gives Avon more room to grow in Asia than Tupperware.
With low expectations and a turnaround under way, more aggressive investors should consider Avon Products, Inc. (NYSE:AVP) for emerging market exposure. More conservative investors, though, should stick to Tupperware.
Industrial Giants
Emerging markets make up about half of ABB Ltd (ADR) (NYSE:ABB)’s business and around 35% of GE’s. That makes ABB a more direct play on the space. The company makes everything from circuit breakers to robots, and has a focus on power. That’s an area that will be increasingly important in the future.
ABB Ltd (ADR) (NYSE:ABB)’s shares sold off after it released second quarter earnings. Although generally strong, the company’s European business has been dragging down results. And a soon to be installed CEO will have to handle the integration of notable acquisitions like Baldor Electric, Thomas & Betts, and Power-One. That’s a lot to deal with.
That said, the shares yield around 3.2% and the dividend has been increased regularly since it was initiated in 2006. Weakness here could be a buying opportunity for growth and income investors willing to monitor the integration of acquisitions and the European business’ turnaround efforts under a new CEO.
General Electric Company (NYSE:GE), on the other hand, has already been through the valley of death and is on the mend. Indeed, the global industrial giant’s financial arm brought it low during the 2007 to 2009 recession. That’s led to a refocusing of the company around its industrial core. Although it has less exposure to emerging markets than ABB Ltd (ADR) (NYSE:ABB), it’s still a big player.
The company’s second quarter earnings from continuing operations beat analyst expectations by a penny, leading the shares to advance notably. More importantly, however, GE reaffirmed its expectation for margin expansion to continue in the industrial business. GE’s business is clearly improving.
