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 (
) -- 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
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
Claymore/AlphaShares China Small Cap ETF
. 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
, with nearly $13 billion in assets, is up a mere 4% in the last year. And the diversified
iShares MSCI BRIC Index Fund
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
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,
, 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.
Brazilian beverage giant
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.
A very savvy colleague of mine, Ivan Martchev, said to me the other day "as Russia goes, so does
." 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.
Related Article: 5 oil stocks to pump and 5 to dump
Russia: Russia Capped Index ETF
Though it may seem like a contradiction for me to bang up broad-based funds and then pitch a Russia ETF, note that the
iShares MSCI Russia Capped Index Fund
is essentially a heaping helping of Gazprom with some other Russian stocks on the side. With 25% of assets behind OGZPY stock and another 11% behind
, you're essentially making a slightly less aggressive play on the Russian energy scene. But fair warning --ERUS launched in November and trades only about 50,000 units a day.
Related Article: 3 hot emerging market ETFs
is one of India's largest mining companies, with interests and operations in aluminum, copper, zinc and lead. While the stock has admittedly underperformed the market recently, the company is on track to grow earnings by over 35% this fiscal year -- and its January earnings report showed profits up 60% on higher base metal prices. Inflation seems like a foregone conclusion in commodities like energy, food and metals. Though things have been rocky in the near term --India investments had a heck of a January and have yet to recover -- this uptrend coupled with projections of 50% sales growth in the next fiscal year add up to a decent long-term buy in India.
Related Article: 5 BRIC bargains to buy now
China: CNOOC Ltd.
China National Offshore Oil Company
is a massive oil company in one of the largest energy producing regions of the world and enjoys favored status with the government to grease the skids. It's hard to bet against a play like that. With crude oil prices steadily on the rise to boot, CEO seems a great China play. It has been so far -- shares are up over 10% since Jan. 1, and are up over 50% in the last 12 months. CEO is just a shade off a new 52-week high, but that could be one of many marked by this oil giant in the next several months.
Related Article: CEO is one of 10 top stocks for 2011 investors should buy and hold all year.
I know, everyone always rolls their eyes at folks who call
"China's Google." But now that Google has all but given up on China, there's really no other way to put it. The internet giant is growing at a breakneck pace. Revenue almost doubled from 2009 to 2010, and growth could top 70% this fiscal year. Is it any wonder shares have doubled in the last 12 months? China's heavy hand with the Web all but ensures that western players like
will have trouble getting into the market -- or at least trouble stomaching the rules. In a vacuum, Baidu is sure to thrive.
Related Article: 7 best emerging market buys
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks or funds named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.