You Can Grow Your Dollars by 800% in These Foreign Markets

Bombs over Baghdad…

That’s what I talked about yesterday… investment opportunities in dangerous and far-off places that most people haven’t even heard of… or wouldn’t step foot in.

And right now, 99.9% of investors overlook the Iraqi stock market even though it’s one of the cheapest in the world.

But Iraq isn’t the only “dangerous” market worth a look.

Recently, I attended an exclusive investment conference in South Carolina. While there, I saw a presentation from RWC Partners.

RWC Partners specializes in investing in emerging and frontier markets.

Emerging markets are in countries like China and Brazil. Some call them the Wild West of investing.

Frontier markets are even more wild and unregulated.

China looks tame compared to places like Argentina, which has debt defaults on average every 28 years… Bangladesh, which had a military coup just 10 years ago… and Kazakhstan, a former Soviet republic run by a dictator.

Most people stay out of these markets because of fear. We scour them to uncover profitable investments that haven’t become mainstream yet.

You see, there are a lot of money-making opportunities in frontier markets. That’s why you should allocate a small part of your portfolio to them.

If you want to diversify your assets with a few foreign stocks, here’s why you should consider frontier markets…

Big Gains on the Frontier

James Johnstone manages the emerging and frontier markets team at RWC Partners. The firm has an impressive history of finding great companies in these markets.

Recently, RWC bought a Bangladeshi company that makes Olympic biscuits.

The company infuses its biscuits with protein and vitamins. Everyone in Bangladesh who can afford them, eats them. He’s made 500% returns in 18 months.

In 2002, RWC bought the largest bank in Indonesia. That investment is up 3,500% in 15 years.

James still sees a lot of opportunity in frontier markets. Here’s why…

Today, over half the world lives in these countries. And by 2020, almost 25% of the world’s GDP will come from them.

Despite that rapid growth, frontier markets only account for 3% of the world’s stock market value. That’s a huge opportunity…

If you believe that frontier markets should be valued the same as emerging and developed markets (which I do), they need to rise 800% in value.

That’s before you even factor in how fast these markets are growing.

Why Frontier Markets Are a Good Value

James uses the ratio between a country’s market cap and GDP to find deals in foreign markets. (Not coincidentally, Warren Buffett uses this measure for the same reason.)

The United States has a market cap-to-GDP ratio of 130%. Many developed nations trade over 100%.

Many frontier markets sell at a ratio of 20%. That’s five times less than developed nations.

But we don’t like frontier markets just because they’re extremely cheap. We like them because they’re extremely cheap and growing.

James told me these markets are averaging 9% annual GDP growth.

Developed economies can only dream of that kind of growth. Yearly growth in the United States is 3.5%. And in China, it’s only 7% per year.

The type of growth we’re seeing in frontier markets gives companies room to expand. And in turn, more opportunities to make profits.

In a normal world, frontier markets would be a lot more expensive than developed markets.

They’re growing much faster and have more upside potential. But many investors view them as a risky gamble.

In fact, by adding frontier markets to your portfolio, you can make it more resilient.

Many Americans are heavily invested in U.S. stocks. That presents a problem… When the U.S. economy slows down, your portfolio takes a big hit.

That’s why you need to be diversified. Most of these frontier markets are not tied to the U.S. economy. So, they wouldn’t be affected by a slowdown here.

This kind of diversity protects your wealth.

Where to Look

Some of James’ favorite plays right now are the Philippines, Bangladesh, Vietnam, Romania, Kazakhstan, Rwanda, and Argentina.

The easiest way to buy into these is through the Guggenheim Frontier Markets (FRN) exchange-traded fund (ETF).

If you want to buy individual countries, check out ETFdb.com. You can search by country to see which ETF has the most exposure to the country you’re interested in.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. Buying frontier markets can add a layer of diversity that bulletproofs your portfolio. Yet many people still fear these money-making opportunities. Tell us what’s keeping you out of these markets—or if you’re ready to take the plunge into them—right here.

MARKET BRIEFS

Bitcoin Skyrockets Past $7,000: Bitcoin blasted past $7,000 for the first time last week. The surge followed news that CME Group will launch bitcoin futures by the end of the year. CME Group runs the largest derivatives exchange in the world. The move will help establish bitcoin as an asset class. We told you in August that the arrival of bitcoin futures will open the floodgates to institutional investment. And speculators are buying in advance of this wall of money.

Weed Going Mainstream: One of the world’s largest beer distributors is getting into the legalized weed business. Constellation Brands owns Corona, Modelo, and Pacifico beers; and Svedka vodka. The company recently bought a 9.9% stake in the Canopy Growth Corporation. Constellation made the move in anticipation of the nationwide legalization of marijuana in the United States.

In 2018, California is set to legalize recreational marijuana. But Constellation plans to first start selling in countries where recreational marijuana is already legal nationwide. Canada could be an option if legislation there is relaxed next year. This is the latest profitable trend we’ve been following at the Daily.

Two Trends in One: Two of the hottest plays this year have been blockchain ventures and marijuana stocks. Now comes word that tech giant IBM is testing blockchain technology to keep track of legal weed sales when Canada goes fully legal next year. IBM’s proposal was submitted to the British Columbia provincial government, which is looking for ways to manage pot sales. The company says the blockchain “ledger” could track weed sales from grower to a smoker’s pipe. Stay tuned for more.

IN CASE YOU MISSED IT…

If you missed Teeka Tiwari’s special cryptocurrency webinar last week, here’s your last chance to watch the free replay

Posted in Palm Beach Daily
Join our Daily Newsletter

Reading The Palm Beach Daily will help you grow your bottom line and live a happier life in just three minutes a day.