Not another BRIC in the wall
By Motley Fool Staff - September 25, 2012
MIST countries are a great place to look for outsized returns
Acronyms are great. They teach us everything from how to behave in the classroom to what goes into our pharmaceuticals. One of the more popular acronyms in the finance world over the last decade has been “BRIC” — representing the high-growth emerging economies of Brazil, Russia, India, and China. Well, investors are so over China, and India seems so over investors. Brazil’s growth has tapered off, eclipsed by other South American nations. As for Russia, political risk and a general Russia-phobia keeps many investors out. So now there’s a new acronym trending across the waters: MIST.
Leave it to beaver
Someone has to come up with these terms, right? Well, this time it’s Goldman Sachs (NYSE: GS) leading the way. MIST stands for Mexico, Indonesia, South Korea, and Turkey. For Goldman Sachs, these four nations make up the bulk of the investments in its N-11 Equity Fund, a long-term capital-appreciation fund. Citigroup (NYSE: C) made its own pass at creating an acronym: CARBS (Canada, Australia, Russia, Brazil, South Africa). CARBS is a terrible acronym, first of all. But it also doesn’t offer the growth prospects of the MIST nations. Many analysts believe Australia has a real-estate market that is about to go down the toilet. Brazil’s strong GDP growth, as mentioned, has softened due to poor infrastructure investment and a high rate of inflation.
What’s exciting about the MIST nations is that they are relatively light in the debt department, have great demographics, and show low inflation rates, given their “emerging market” status.
Mexico is one of the most exciting emerging markets available to investors today. Mexico’s 3.6% GDP growth outpaced Brazil’s 2.18% growth in 2011, and it’s on track to outperform again. The Japanese automakers are opening plants in the country, and Mexico as a whole has experienced two decades of stable macroeconomic growth.
A company like Cemex (NYSE: CX), one of the largest cement companies in the world, has the emerging market and value pricing working in its favour due to lacklustre revenue over the last three years and a poorly timed acquisition of Rinker. What investors should focus on, though, is the impending rebound of housing in both the U.S. and Mexico. Cemex will surely benefit from the decades-low levels of new housing starts, which will have to turn around to meet demand.
Mexico is a leader of emerging markets and a great place for investors who want high growth at value prices.
A la Turca
Turkey is becoming an increasingly favourable investment environment. The median age is only 28 years. Some analysts estimate it will surpass Russia as Europe’s second-largest economy by the year 2050. 2011 GDP growth was at a jaw-dropping 8.5%.
The trick is that not many multinational corporations call Turkey home. Investors may struggle to find solid Turkish companies without having any knowledge of the local economy. In that case, check out the iShares MSCI Turkey Index Fund (NYSE: TUR). I am not the biggest fan of managed funds, but this one is up 31% for the year.
Many analysts talk about countries like Vietnam and Nigeria because of their robust growth and, again, young populations. There is, without doubt, tremendous opportunity in these nations, but risk of fraud, lack of transparency, and sharp differences in business practices make these regions very challenging for investors. Turkey is a more mature market with an entrepreneurial mindset — and it’s packaged with the attractive growth, low debt, and favourable demographics of its riskier emerging-market counterparts.
Indonesia and South Korea share the same characteristics as the other regions in this article, though I admittedly know less about these regions. South Korea has a robust auto manufacturing industry. Check out Hyundai Motor (NASDAQOTH: HYMLF.PK). You’ve surely witnessed the meteoric rise of this company from a value-oriented dud to a value-oriented-but-with-premium-options automaker. Sales are up across the board, and the company’s Korean-stock-exchange-based stock has been a fivebagger over as many years.
There’s no question that the MIST countries are a great place to look for outsized returns. While I don’t necessarily support Goldman Sachs’ determining how to group regions of the world, it sure does make for some catchy marketing.
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A version of this article, written by Michael Lewis, originally appeared on fool.com
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MIST countries are a great place to look for outsized returns
Acronyms are great. They teach us everything from how to behave in the classroom to what goes into our pharmaceuticals. One of the more popular acronyms in the finance world over the last decade has been “BRIC” — representing the high-growth emerging economies of Brazil, Russia, India, and China. Well, investors are so over China, and India seems so over investors. Brazil’s growth has tapered off, eclipsed by other South American nations. As for Russia, political risk and a general Russia-phobia keeps many investors out. So now there’s a…