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7 Investments Proving the BRIC is Back

Stocks in this article: BBD ABV ERUS SLT CEO BIDU

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

ROCKVILLE, MD ( InvestorPlace) -- To hear some investors tell it, the boom days of China are a thing of the past. The 2002 to 2007 surge was great, but as the saying goes, what has China done for you lately?

The benchmark indices have left many investors flat. The SPDR S&P China ETF (GXC) has underperformed the major indices slightly over the last 12 months, up about 8% compared with 11% for the S&P 500. More recently, in the last six months the China SPDR is up a mere 4% vs. 14% for the S&P 500 since October. Then there are the iShares FTSE/Xinhua China 25 Index ETF (FXI) and the Claymore/AlphaShares China Small Cap ETF (HAO) . Both are up less than 4% in the last 12 months, well under half the performance of the broader market.

Similar arguments can be made against other emerging markets -- the landmark iShares MSCI Brazil Index ETF (EWZ), with nearly $13 billion in assets, is up a mere 4% in the last year. And the diversified iShares MSCI BRIC Index Fund (BKF) is up only 6% over the last 12 months.

When you look at numbers like this -- alongside headlines of China real estate bubbles and India food inflation and the rest -- the BRIC seems a bad bet. Right?

Wrong. The only thing proven by the underperformance of these funds is that Wall Street is a far more complicated place these days than simply picking a country and putting your portfolio on cruise control. In the boom times, investors could simply throw a dart at China and watch the cash roll in. But now, it takes a more to pick a winner.

I have never been to any of the BRIC nations and don't pretend to be an emerging-markets insider. All investments require homework, and foreign investments require even more. But based on big-picture trends and specific facts for each stock, here are some picks you may want to consider in the BRIC right now:

Brazil: Banco Bradesco

It's no surprise why the iShares Brazil ETF has underperformed -- over 35% of its holdings are vested in some form of Petrobras (PBR) or Vale (VALE) stock. Both the oil giant and metals giant have underperformed the market lately, dragging down this fund. However, another one of this ETF's major holdings, Banco Bradesco (BBD), has fared quite well. The commercial bank is up over 20% in the last year on strong growth in lending and a growing middle class frequenting the bank more. Toss in a 2.6% dividend -- not bad considering the state of financial sector dividends in the states -- and you've got a decent BRIC buy.

Brazil: AmBev

Brazilian beverage giant AmBev (ABV) is an interesting growth opportunity right now. Amid a 5 for 1 split just after Christmas, the company topped earnings expectations for the first time in several quarters, thanks to 13% sales growth overall - 10% growth in its home country of Brazil. It was part of a Q4 report that boasted nearly 50% earnings growth year-over-year on the quarter and nearly 40% for fiscal 2010 over 2009. As an emerging middle class gets more expensive tastes for beer, soda and other beverages, AmBev could be a great long-term play in Brazil. The stock is down slightly in 2011, but adjusted for the slip ABV shares are up about 65% in the last 12 months.

Russia: Gazprom

A very savvy colleague of mine, Ivan Martchev, said to me the other day "as Russia goes, so does Gazprom." The energy giant is the largest Russian company by market cap, and is benefiting doubly from the focus on crude oil and the focus on Russia by institutional investors. The stock is cruising at a new 52-week high -- and with a stunning 17% of worldwide natural gas production and a nearly 10% contribution of total Russian GDP, you can understand why this stock has seen a jump of over 50% in the last six months. Though a pink sheet stock and thus not subject to some of the stricter standards of a major exchange, give Gazprom a look.
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