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the more impressive growth stories in global
business. Despite China’s economy showing
signs of weakness, the world’s largest retailer
continues to deliver exceptional results, with
revenues swelling 43% over the past year and
forecast to continue that impressive trajectory.
Alibaba’s Ant Financial affiliate, which operates
Alipay, gives the company massive exposure to
the rapidly growing mobile payments space.
For those apprehensive about picking out
individual stocks in faraway markets, there
are always foreign-targeted exchange-traded
funds to look to. The iShares Core MSCI
Total International Stock (IXUS) and
Vanguard FTSE All-World Ex-U.S. (VEU)
ETFs are presently research firm Morning-
star’s top-rated funds focused on international
equities. Each fund tracks underlying indexes
across both developed and emerging markets,
according to Morningstar analyst Daniel
Sotiroff, and both are “market-cap weighted”
to emphasize larger companies, which tend
to be less volatile. What’s more, their fees are
“probably some of the lowest you’re going to
see,” Sotiroff notes, with each charging an-
nual expenses of 0.09% of assets, or $9 per
$10,000 invested. “They’re two of the better-
performing funds out there, and [low fees
are] a big part of it.”Bold Bet
IN JAPAN, SWEEPING changes to corporate
governance standards in recent years have
led to improved returns. “Japan is probably
the place where we see the most mispriced
opportunities among developed markets,”
says Katie Koch, cohead of fundamental
equity at Goldman Sachs Asset Management.
Nidec provides exposure to Japan’s market
in a forward-thinking sector: electric motors
and related components that could be critical
to the electric-car fleet of the future. While
Nidec’s recent financial results have under-
whelmed, its forward-looking metrics are
promising. Revenues and earnings per share
are estimated to grow 14% and 44%, respec-
tively, in the fiscal year ending in March 2021.
And those figures could accelerate as the EV
market grows.underperforming American stocks, the MSCI
Emerging Markets Index was trading at 13.5
times earnings at the end of October, com-
pared with the S&P 500’s multiple of 22.3.
But one would be wise to remember that
such dynamics “come in cycles,” says Jed
Weiss, who manages Fidelity Investments’ In-
ternational Growth Fund. “Twelve years ago,
when I started running the growth fund, in-
ternational stocks had beat the pants off U.S.
stocks,” Weiss notes. Nowadays, he adds, “if
you can block out the scary headlines and just
focus on the underlying stock ideas, there’s a
lot of value to be had.”
Among those investment ideas: buying
shares in financial-services companies that
are capitalizing on demographic shifts within
emerging markets. With more people in
countries like China, Thailand, and Malaysia
entering the middle class, multinational in-
surers like Hong Kong–based AIA Group are
in a position to take advantage. In these and
other markets, “citizens don’t benefit from the
same kind of social safety net we have in the
U.S. and Europe,” Weiss says. AIA, which has
seen its stock rally more than 30% in the past
12 months, has been in the market for decades
and benefits from brand recognition and a
strong track record.
Banks, too, are taking advantage of favor-
able demographics in emerging markets. In-
dia’s largest private sector bank, HDFC Bank,
has made major strides in a domestic market
still dominated by publicly backed financial
institutions. With an array of consumer and
commercial offerings including checking and
savings accounts, mortgages, car loans, credit
cards, and personal and business loans, HDFC
is well positioned in a country with a massive
population that is still largely underbanked.
“They’ve been able to eat market share be-
cause they have a lower-cost business model
and are not bloated with too many branches
and employees,” Vontobel’s Benkendorf says of
HDFC. “India itself is a great country to invest
in; you have very good demographics and
a good accounting and legal structure. It’s a
very good long-term growth story at large.”
Alibaba Group continues to have one of
INVES T OR ’ S GUIDE 2020 STOCKS AND FUNDS
PICKS
AIA Group
(AAGIY, $42)HDFC Bank
(HDB, $62)Alibaba Group
(baba, $187)iShares Core
MSCI Total
International
Stock
(IXUS, $61)Vanguard FTSE
All World Ex-U.S.
(VEU, $53)Nidec
(NJDCY, $38)PRICES AS OF 11/08/19