Emerging Market Stocks: Can Emerging Markets Make a Comeback in 2012?

It has been established that market volatility in 2011 sent investors fleeing from developed market equities and into the perceived safety of other markets -- unfortunately, emerging markets weren't on the list.

Because of the risks attributed to emerging markets, fleeing investors helped the MSCI Emerging Markets Index to drop by around 20% last year.

Rebound potential
CNBC says, "The flight to safe havens in the latter part of 2011 hurt emerging market equities, but strategists believe it may be time to pick up some devalued emerging market stocks."

Why is that? Because emerging markets may be more prepared to combat the economic slowdown than the world's economic superpowers.

Ewen Cameron Watt, Chief Investment Strategist at BlackRock Investment Institute, tells CNBC he believes the BRIC economics (Brazil, Russia, China, and India) will reverse in 2012.

"If you can buy emerging markets equities at 30 percent cheaper, why not do that?" he asked.

Others are less optimistic: Mark Tinker, Global Portfolio Manager at Axa Framlington, "was more cautious about emerging markets and told CNBC he was 'not yet sure' if there was sufficient risk premium in the valuation of emerging market equities."

Business section: Investing ideas
Interested in giving your portfolio an exposure to 2012 emerging markets?

To help you explore ideas, we identified the most profitable emerging market stocks, based on gross and net profit margins.

All of the emerging market stocks mentioned below are more profitable than their competitors -- do you think these trends will continue into the new year?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Companhia de Bebidas Das Americas: Engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt, and other non-alcoholic and non-carbonated products in the Americas. Incorporated in Brazil. TTM gross margin at 68.07% vs. industry average at 59.48%. TTM operating margin at 38.91% vs. industry average at 22.98%. TTM pre-tax margin at 39.81% vs. industry average at 24.47%.

2. Vivo Participacoes (NYSE: VIV  ) : Incorporated in Brazil. TTM gross margin at 60.71% vs. industry average at 50.28%. TTM operating margin at 18.8% vs. industry average at 15.34%. TTM pre-tax margin at 19.89% vs. industry average at 12.79%.

3. Mobile Telesystems (NYSE: MBT  ) : Provides telecommunications services primarily in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, Armenia, and Belarus. Incorporated in Russia. TTM gross margin at 69.42% vs. industry average at 60.27%. TTM operating margin at 22.08% vs. industry average at 20.02%. TTM pre-tax margin at 15.33% vs. industry average at 14.28%.

4. Chemical & Mining Co. of Chile (NYSE: SQM  ) : Engages in the production and sale of fertilizers and specialty chemicals in Chile and internationally. Incorporated in Chile. TTM gross margin at 46.9% vs. industry average at 37.63%. TTM operating margin at 34.11% vs. industry average at 17.58%. TTM pre-tax margin at 30.99% vs. industry average at 16.65%.

5. Telefonos de Mexico (NYSE: TMX  ) : Provides telecommunications services primarily in Mexico. Incorporated in Mexico. TTM gross margin at 60.96% vs. industry average at 50.28%. TTM operating margin at 24.8% vs. industry average at 15.34%. TTM pre-tax margin at 19.92% vs. industry average at 12.79%.

6. Grupo Televisa: Operates as a media company in Mexico and internationally. Incorporated in Mexico. TTM gross margin at 51.67% vs. industry average at 42.29%. TTM operating margin at 26.49% vs. industry average at 18.79%. TTM pre-tax margin at 18.05% vs. industry average at 14.96%.

7. Bancolombia: Provides financial products and services to individual and corporate customers in Colombia, Panama, El Salvador, Puerto Rico, the Cayman Islands, Peru, Brazil, the United States, and Spain. Incorporated in Colombia. TTM gross margin at 72.4% vs. industry average at 68.43%. TTM operating margin at 51.43% vs. industry average at 38.67%. TTM pre-tax margin at 26.06% vs. industry average at 22.09%.

8. Enersis: Engages in the generation, transmission, and distribution of electricity in Chile, Argentina, Brazil, Colombia, and Peru. Incorporated in Chile. TTM gross margin at 30.49% vs. industry average at 26.93%. TTM operating margin at 24.23% vs. industry average at 18.28%. TTM pre-tax margin at 21.16% vs. industry average at 13.82%.

9. Credicorp (NYSE: BAP  ) : Provides a range of financial products and services in Peru, Bolivia, and Panama. Incorporated in Peru. TTM gross margin at 74.43% vs. industry average at 71.64%. TTM operating margin at 47.99% vs. industry average at 39.36%. TTM pre-tax margin at 30.69% vs. industry average at 22.63%.

10. LAN Airlines: Provides passenger and cargo air transportation services. Incorporated in Chile. TTM gross margin at 36.01% vs. industry average at 23.68%. TTM operating margin at 11.27% vs. industry average at 8.65%. TTM pre-tax margin at 8.% vs. industry average at 5.36%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Profitability data sourced from Fidelity.

Motley Fool newsletter services have recommended buying shares of Chemical & Mining of Chile. 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.


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