Seeking Strength in the BRICs (MBT, HDB, IBN)
As economic growth in China and Brazil slows, India and Russia have taken the lead as the strongest economies among the big four emerging markets, according to a report from HSBC.
A telecommunications company from Russia and two banks from India are the top-performing stocks from those nations on the U.S. exchanges. All three stocks are currently recovering from sell-offs in April and/or May, despite being at least 15% higher than at the beginning of the year. Here is a quick review of those three stocks, as well as a peek at some other options for investing in the two stronger BRIC nations.
Mobile Telesystems OJSC (NYSE: MBT) provides mobile phone, broadband and other services to Russia, Armenia, Belarus, Uzbekistan and others. The stock reached a new 52-week high in early May before tumbling nearly 20 percent. Shares have recovered about 8 percent since then. This Moscow-based company has a market capitalization of more than $17 billion and a dividend yield near 6 percent. The P/E and PEG ratios are less than the industry average. The long-term earnings per share (EPS) growth forecast is more than 17 percent, and the return on equity is about 43 percent. Furthermore, the consensus price target is more than 20 percent higher than the current share price, as well as more than 10 percent higher than the 52-week high. The stock has outperformed competitor VimpelCom (NYSE: VIP) and partner Vodaphone (NASDAQ: VOD) over the past six months.
Mumbai-based HDFC Bank (NYSE: HDB) provides retail banking and other financial services to individual and business customers in more than 1,200 cities in India. Its stock also plunged in May, falling more than 18%. However, it has recovered most of that ground since and the share price is up about 29 percent year to date. HDFC's market cap is now a little over $5 billion and it offers a dividend yield of less than 1 percent. The P/E ratio is much higher than the industry average but forecast to fall. More attractive for investors are the healthy long-term EPS growth forecast of more than 25 percent and the return on equity of more than 17 percent. The consensus price target of analysts is still more than 7 percent higher than the current share price, as well as a bit higher than the 52-week high. The stock has outperformed Bank of America (NYSE: BAC) and Citigroup (NYSE: C) over the past six months.
Shares of HDFC's rival, ICICI Bank (NYSE: IBN), declined less than 10 percent in April and May. The stock has risen more than 11 percent in the past month, and it is around 30 percent higher year to date. Also headquartered in Mumbai, this $19 billion market cap company serves corporate and retail customers in India and internationally. Its long-term EPS growth forecast is more than 19 percent, and the dividend yield is about 1.7 percent. The P/E ratio is higher than the industry average, but much less than that of HDFC. The consensus price target on ICICI is more than 17 percent higher than the current share price, meaning analysts feel the stock has some room to run. Over the past six months, though, the stock has underperformed HDFC Bank. However, it has outperformed the S&P 500 in that time.
Investors concerned about the risk inherent in investing in BRIC nations may want to consider these exchange-traded funds instead. Like the stocks mentioned above, these ETFs are recovering from spring sell-offs.
- SPDR S&P Russia ETF (NYSE: RBL)
- Market Vectors Russia ETF (NYSE: RSX)
- iShares S&P India Nifty 50 Index (NASDAQ: INDY)
- WisdomTree India Earnings Fund (NYSE: EPI)
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