Where are the best places on earth to invest? How about Japan, as it recovers from the worst earthquake and resulting tsunami in its recorded history? Or does Europe look promising as it takes care of its sovereign debt crisis. Is Vietnam going to become the workshop for outsourcing from China as Chinese wages rise? Do Brazilian oil and other commodities look good to you? Is China still one of the best places on earth to invest or is the long expected collapse of the Chinese real estate bubble going to take its toll? As always investors do well to engage in fundamental analysis of all of their investments. But, as we look for the best places on earth to invest, keeping an eye on market sentiment is also a good idea. Here we offer a few thoughts on just where to look for the best places to invest and why.
The US Market is Recovering. Will Emerging Markets Follow?
A general observation that many have made recently is that the US stock market has made up for last year’s losses but markets throughout the world have not. This is despite the fact that many economies are growing at faster rates than that of the USA. Remember that many offshore investments were overpriced before the market crash. Everyone seems to have been looking for exceptional return on investment. Thus investors put their money into hedge funds as well as non-transparent offshore investments. Many who chose either of these routes no longer have the investment capital with which to repeat their mistakes. Picking a strong company in an emerging market is part of today’s value investing. Picking a non-transparent stock with allegedly strong growth figures is just throwing darts.
Many smart long term investors only invest in a stock when they understand just what the company does to make money. When an investor cannot find a clear and honest financial statement of costs, cash flow, and income it may be smart to avoid the stock in question, no matter whether it is in a rapidly growing market or not. Picking new winners in the world economy is more than just throwing money at growth figures. It requires information as good as one would use to invest in US stocks.
Many emerging market economies are commodity driven. To the extent that strict austerity measures in Europe slows down growth and the housing bubble in China bursts, economies based on raw material exports will probably not be where you want to invest. Investment in a China with lower growth targets ought to be more conservative that previous attempts to throw money at Chinese stocks in search of a miracle.
Follow the Money and the Emerging Middle Class
In many regions of the world the middle class is growing and asserting itself. Today’s investor can easily invest in US stocks that benefit from this demographic phenomenon. Walk through a supermarket in Panama City, Panama, Bogota, or Buenos Aires and you will see familiar US brands. Whether the lady of the house calls it “cloro” or “Clorox,” she still buys bleach. Procter and Gamble sells Tide, Gillette razor blades, and a huge number of products to a growing middle class virtually everywhere. Cisco routers are sold internationally. These companies will very likely profit from an accelerating global economy and they are stocks that US investors should find easy to evaluate. No matter which of the best places on earth to invest interests you, remember that how to invest in stocks profitably requires consideration of safely as well as growth potential.