Rules of the Game: Checking Out Emerging Markets

 | Jan 18, 2013 | 3:00 PM EST  | Comments
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Stock quotes in this article:

ttm

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bidu

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vip

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brfs

Within the past couple of years, Chinese stocks have begun to figure prominently as growth leaders. These days, the only China-based large-cap that shows up anywhere near the top of my BRIC scan is Baidu (BRIC).

The company continues doing well when it comes to earnings and revenue growth, but the technicals are not particularly eye-catching. Stocks from India, Russia and Brazil are better price performers at the moment. Some of these are companies that fell off my radar for several years, but are showing renewed signs of life.

I readily admit that I'm immature, and can't help giggling at the name Tata Motors (TTM) -- the company is based in Mumbai, India. Nonetheless, the stock's current price strength is a very serious matter. Following a gain of 14.6% in December, the stock has advanced 7% so far this month.

Last week, the stock rallied to a 52-week high of $30.85. It pulled back to find support at its 15-day exponential average, and then rebounded, once again hitting resistance at $30.85. It closed Thursday at $30.72. Thursday's 2.6% price move followed news of strong global sales. Its brands include Jaguar and Land Rover.

Analysts expect a year-over-year earnings decline this year, to $1.64 per share. That's expected to turn around in 2014, with an increase of 31%, to $2.15 per share.

The stock is in a technical buy range at the moment. But before making a purchase, be sure to see how Tata Motors fits with your overall investing objectives, and be sure it fits with existing portfolio holdings. In other words, don't add this stock if you already own other India-based names.

Russia-based telecom Vimpelcom (VIP) hit the skids in the 2008 market meltdown. It participated in the 2009 market-wide rally, but began heading south in November of that year, and has not yet recovered. However, the stock vaulted to a 52-week high this week, after management said they are aiming to increase cash flow by as much as $2.9 billion by the end of 2015.

The stock's earnings per share (EPS) took a big dip in 2011, from $1.39 per share to $0.40. When the company wraps up 2102, analysts expect to see EPS of $1.06, which would mark a 165% year-over-year gain.

Vimpelcom is one of those stocks that could use a breather before offering a buy opportunity. It's currently extended from its short- and medium-term moving averages. A pullback to a short-term line could provide the next technical entry point.

Another large-cap BRIC name trading in new high ground is meat producer Brazil Foods (BRFS). The company announced a couple of acquisitions in recent weeks, helping to lift its price.

Though analysts see 2012 earnings heading lower, to $0.34 per share, growth is expected to resume this year, to $0.91 per share.

Brazil Foods closed Thursday at $22.27, less than 1% below its Jan. 9 high of $22.52. The stock is in a technical buy range, having rebounded off 5-day support in Thursday's session. Don't wait for it to get too extended from that prior high before attempting an entry. Also, as noted earlier, do the due diligence to see how the stock fits with your existing holdings.

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