We recently compiled a list of the 7 Best Emerging Markets Stocks To Buy Now. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against the other emerging markets stocks.
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.
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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.
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).
An e-commerce platform displaying a wide range of products to customers online.
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.
Overall, BABA ranks 1st on our list of the best emerging markets stocks to buy now. 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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Disclosure: None. This article is originally published at Insider Monkey.