4 Solid Stocks Within the BRIC Nations
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Goldman Sachs economist Jim O’Neill first coined the phrase ‘BRIC’ nations to categorize the countries most widely believed to be at the forefront of emerging market growth. These countries -- Brazil, Russia, India, and China -- comprised his belief that international countries, not the United States, would lead economic growth in the future. Indeed, economic growth in the United States has been painfully slow, particularly with fourth-quarter gross domestic product surprisingly turning negative. The following stocks operate within the BRIC nations, and stand poised to profit from their nations’ greater growth.
China Mobile (NYSE: CHL) is a $220 billion giant based in Hong Kong. China Mobile provides telecommunications services primarily in Mainland China. The company has more than 180,000 employees and serves more than 700 million customers, making it the largest telecom carrier in the world.
The stock looks cheap, with a trailing price-to-earnings ratio of 11 times and a forward P/E of 9. In addition, the company has roughly $15 per share in cash. The stock has performed well recently from a fundamental basis, with revenues during the first three quarters climbing 6% year over year. China Mobile pays a semi-annual dividend, which amounts to a nearly 4% yield at current prices.
Vale (NYSE: VALE) is the $101 billion metals giant based in Brazil. Vale has had a good run, increasing revenues almost 20% year over year. In addition, the company is well-capitalized, with a debt-to-equity ratio below 40% and a current ratio of almost 2.5. Investors may need the ability to stomach volatility in the company’s underlying profitability, as earnings per share are expected to decline next year, a concerning development considering the company's revenues dropped 24% during the first nine months of 2012 versus the prior year. However, the company isn’t expensive at its current price, trading at a trailing price-to-earnings ratio of 8.
LUKOIL (NASDAQOTH: LUKOY) is a Russian oil major with a $50 billion market capitalization. Shares of Lukoil are essentially flat since the beginning of 2011. As a result, the stock appears to be trading at a measurable discount to its American counterparts. Lukoil is currently trading below book value, holds a trailing P/E of less than 6, and offers investors a solid dividend yield north of 3%.
It appears that investors are reluctant to bid up this Russian company, perhaps the result of geopolitical concerns. However, underneath those concerns is a very profitable company in a great financial position. The company has a very solid balance sheet, with a current ratio of more than 2 and a long-term debt to equity ratio less than 10%. Lukoil reported that revenues over the first nine months of 2012 increased 4% versus the prior year.
PetroChina (NYSE: PTR) produces and sells oil and gas in the People's Republic of China. The stock is truly a juggernaut, commanding a $243 billion market value. PetroChina operates in four segments: Exploration and Production, Refining and Chemicals, Marketing, and Natural Gas and Pipeline. The stock is modestly valued, with trailing and forward P/E ratios of 13 and 10, respectively.
The company had a challenging start to 2012, with diluted earnings per share dropping 6% year over year. The stock followed suit, swinging between $120 and $155 last year before settling to its current level of $136. The company attributed the drop in earnings to the weak global economy. The combination of lower demand and higher supply led to the drop in profitability. However, the company is optimistic about the future, as a result of its internal cost controls and optimized investments. PetroChina also pays a dividend, amounting to a 3% yield at recent prices.
The Foolish Bottom Line
Investors who prefer international diversification within their equity portfolios may want to give these stocks a closer look. Under-developed economies outside the United States are likely to show greater economic growth rates as the result of expanding middle classes in countries like China, Brazil, and Russia.
The BRIC nations contain some very successful companies, such as the ones on this list, that may be flying under the radar of investors in the United States. These stocks offer the potential for accelerated growth as well as dividends and are an interesting way to play the global economic growth story.
Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!