3 Companies Benefiting From the Emerging Markets Consumer Boom

Las Vegas Sands, MercadoLibre, and Yum! Brands are three strong candidates for investors willing to withstand short-term volatility in order to capitalize on exceptional long-term growth prospects in emerging markets.

Mar 17, 2014 at 4:45PM

Emerging markets have been quite volatile lately due to currency instability and other economic concerns. However, short-term uncertainty usually creates opportunity for long-term investors, and companies such as Las Vegas Sands (NYSE:LVS), MercadoLibre (NASDAQ:MELI), and Yum! Brands (NYSE:YUM) are remarkably well positioned to benefit from growing consumption in emerging markets for decades to come.

Lvs Image

Source: Las Vegas Sands.

Las Vegas Sands is a smart bet
Macau is the only region in China where gambling is legal, and Las Vegas Sands is one of the only six companies with licenses to operate in the region. Not only that, but the company owns a leadership position in the lucrative Macau Cotai Strip, and it plans to continue expanding aggressively in that market in the medium term.

Las Vegas Sands plans in late 2015 to inaugurate the Parisian Macau, its fifth property on the Cotai Strip and its sixth in Macau; this will add 3,000 rooms to its portfolio in the region. The fourth and final tower of the Sands Cotai Central is expected to be inaugurated in the fourth quarter of the same year, adding 700 additional hotel and apartment units to its presence on the Cotai Strip. According to management, Las Vegas Sands will own 44% of the market with 16,677 rooms by the end of 2017.

Gambling revenue in Macau remains remarkably strong, with an increase of 40% to a record $4.8 billion during February, so a slowing Chinese economy doesn´t seem to be much of a problem for casinos in the region.

Las Vegas Sands is also exploring opportunities for expansion in countries such as Japan, South Korea, and Vietnam, where the company is strongly positioned to compete for new development projects as a leading operator with plenty of experience in Asia.

Mercadolibre Image

Source: MercadoLibre.

MercadoLibre has enormous potential
MercadoLibre is the undisputed leader in the Latin American e-commerce business, an industry with enormous potential for growth in the long term.

Management estimates that online commerce currently accounts for less than 3% of all retail transactions in the region, and that there is room to double or triple that market only by getting to the same level of penetration as countries such as China or the U.S. have in their respective regions. 

eBay owns nearly 18% of MercadoLibre, and the companies share many aspects when it comes to business strategy. Similar to what eBay has done with PayPal, MercadoLibre is expanding MercadoPago beyond its marketplace operations to become a digital payments platform with its own growth opportunities as an independent business.

Economic problems and currency devaluations in countries such as Venezuela and Argentina are creating headwinds for MercadoLibre lately. But the company is still generating extraordinary performance for investors: Revenue during the fourth quarter of 2013 increased by an explosive 29.8% versus the year-ago quarter on the back of a 29.9% increase in gross merchandise volume and an even more impressive jump of 42.1% in payments volume.

It's hard to tell how economic difficulties in Latin America may affect MercadoLibre in the coming quarters, but the company stands to benefit from extraordinary growth opportunities over years to come.

Yum Image

Source: Yum! Brands.

A new year in China for Yum! Brands
Yum! Brands has successfully built a leading presence in emerging markets in recent years, and the company seems to be making progress in recovering from the negative impact produced by controversy over the poultry suppliers in its Chinese KFC operations in December 2012. In the words of CEO David Novak, "We know we still have some work to do but we're confident we're making progress with consumers and are pleased with the continued same store sales improvement we're seeing so far."

Management forecasts earnings per share to increase by at least 20% during 2014, and acceleration of growth in China is most likely one of the main drivers in that assumption.

The company ended 2013 with more than 5,800 stores in China among its three brands: KFC, Pizza Hut, and Taco Bell. India is becoming another key market, with Yum! Brands planning to operate more than 730 locations in the South Asian state by the end of the year.

Yum! Brands is relying heavily on franchises for international expansion; this provides higher profitability and lower capital requirements for the company. Management expects to open at least 1,000 international units in 2014 outside of China and India, so Yum! Brands is firing on all cylinders in terms of global expansion.

Foolish final words
Emerging markets typically carry higher uncertainty and volatility than developed countries, but in exchange they offer superior potential for growth. Las Vegas Sands, MercadoLibre, and Yum! Brands are three solid alternatives for investors willing to accept the short-term risks in order to capitalize on the long-term opportunities.

Do you know how to profit from booming Chinese auto demand?
U.S. automakers boomed after WWII, but the coming boom in the Chinese auto market will put that surge to shame! As Chinese consumers grow richer, savvy investors can take advantage of this once-in-a-lifetime opportunity with the help from this special Motley Fool report that identifies two automakers to buy for a surging Chinese market. It's completely free -- just click here to gain access.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends and owns shares of eBay and MercadoLibre. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers