Top 10 Emerging-Market Stocks: Past Month

NEW YORK (TheStreet) -- During the past one month, the U.S. blue-chip indices S&P 500 Index and Dow Jones relinquished 2% and 1.6% respectively, amid renewed European debt crisis and the downgrade of U.S. debt rating. Among emerging markets, India's Nifty retreated 7.8%, while China's Shanghai Composite eroded 6.9%, and Brazil's Bovespa wiped out 5.6% during the past one month.

Data compiled by EPFR show that for the first time in two months, in the third week of May, emerging markets' equity funds narrowed $1.64 billion, accounting for a major portion of the global equity funds outflow of $7.07 billion. To date, foreign institutional investors offloaded $1.6 billion as compared to $2.1 billion in May 2010.

An expert from Gartmore Investment Management comments that the emerging markets growth in 2011 seems to be attractive, based on earnings growth, which is forecast above 15%. He foresees the situation improving in EMs through the year on improved consumer confidence and the pace of investments.

A few emerging-market ADRs generated lucrative returns for investors during the past one month, while a few, as per analysts' estimates, have potential upsides over the next 12 months. We present below 10 such stocks that gained 2% to 155% in the past month. A few of these stocks have upsides in the range of 16% to 80%, based on analysts consensus estimates polled by Bloomberg.

10. Tele Norte Leste Participacoes ( TNE), a telecom service provider in Brazil, offers a range of integrated telecommunication services including fixed-line, mobile, data transmission, and Internet services. The company operates under the brand name TNL PCS (Oi). The stock has gained 2.3% during the past one month.

Of the eight analysts covering the stock, 38% rate a buy, while 50% advise a hold. Analysts polled by Bloomberg expect the stock to gain an average 15.8% to $20.8 over the next 12 months.

For the first quarter of 2011, the company recorded 2.2 million clients with 30% of net additions from Oi in Brazil. Additionally, at the end of March 2011, mobile subscriptions reached 41.5 million, up 13% from the year-ago period. Broadband subscribers increased 9% during the quarter.

The company recently said that it is seeking to raise $926 million from a debentures issue. Besides, it is planning to update the value of its dividend per share amount to 36 cents per ordinary share and 50 cents per preferred share.

9. TAM ( TAM), a Brazil-based airline company, engages in providing scheduled air transportation services in the domestic and international circuits. Operating through three subsidiaries, TAM manages scheduled passenger and cargo routes to 42 domestic cities and 18 international destinations. Through regional alliances, TAM serves an additional 40 domestic destinations. In the past one month, the stock has gained 3.2%.

Of the 10 analysts covering the stock, 80% recommend a buy, while the remaining rate a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average 23.5% to $27 in the upcoming 12 months.

Net income for the first quarter of 2011 was $77.6 million as against a loss of $39.2 million in year-ago quarter. Net revenue increased 16.8%. Last month, the airline company entered into a codeshare agreement with Spanair, a member of the Star Alliance and signed a partnership agreement with an interstate bus company -- Princesa do Agreste -- to sell air tickets through Princesa's sales desks.

For 2011, the company estimates domestic demand growth in the range of 15% to 18% and supply to range between 10% and 14%. Meanwhile, international supply growth is forecast at around 10%. Besides, TAM expects to end 2011 on a strong note -- operating 156 aircraft, and the addition of a new Airbus A320 during the second quarter.

8. iGATE ( IGTE), operating through its subsidiaries, provides information technology and IT-enabled operations, off-shoring outsourcing services to large and medium-sized companies. These companies are spread across a diverse range of industries like financial services, insurance, manufacturing, media and healthcare. The stock has gained 7.5% during the past one month.

Of the eight analysts covering the stock, 63% recommend a buy while remaining suggest a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average 33% to $23.6 in the upcoming 12 months.

Net income for the first quarter of 2011 increased 54% to $17.9 million or 22 cents per share, compared to the year-ago period. Revenue was up 31%. Last month, the company completed the acquisition of Patni Computers with both continuing to operate as separately listed entities and working together in the best of their interests.

The company plans to integrate its back office functions -- HR, IT, finance and admin -- on a common, shared-services platform to result in cost synergies of almost $25 to $30 million over the next two years. Also, iGATE estimates gross margin between 40% and 41% and EBITDA at 25%, post acquisition.

7. Semiconductor Manufacturing International ( SMI), operating through its subsidiaries, provides semiconductor fabrication services using 0.35 micron to 45 nanometer process technology for devices such as logic technologies, memory technologies and specialty technologies. In the past one month, the stock has gained 8.7%.

There are three analysts that cover the stock. HSBC has upgraded the stock's rating from underweight to neutral affirming its price target at $4.25.

Total revenue for the first quarter of 2011 increased 7% year-over-year to $371 million. The company recently entered into a joint venture agreement with Hubei Science & Technology Investment Group to invest and manage Wuhan Xinxin Semiconductor Manufacturing Corporation's 12-inch wafer production line.

For the second quarter of 2011, the company foresees a 3% to 7% revenue decline, driven by the transition to 65-nano and 45-nanometers and the impact of Japan's earthquake on the semiconductor supply chain. Additionally, for its 65-nanometer, revenue is seen more than doubling the in the second quarter 2011 from first quarter levels. For the remainder of 2011, SMI expects to target mass production, with 45/40-nanometer capacity increasing from 1,000 to 4,000 12-inch wafers per month by the end of 2011.

6. Feihe International ( ADY) is a producer and distributor of milk powder, soybean milk powder, and related dairy products in China. The company has three operating subsidiaries: Feihe Dairy - produces, packages and distributes milk powder and other dairy products; Gannan Feihe -- produces milk products; and Shanxi Feihe -- produces walnut and soybean products and Langfang Feihe. The stock surged 12.6% during the last one month.

Of the two analysts covering the stock, 50% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting 37.1% upside to $13.5 in the upcoming 12 months.

For the first quarter of 2011, the company recorded an increase of 22.6% sequentially to $76.4 million in its total revenue. Meanwhile, net income stood at $4.7 million or 26 cents per share, compared to $0.8 million or 8 cents per share in the fourth quarter of 2010. As of March 31, 2011, the company had cash and cash equivalents of $19.1 million as compared to $17.5 million as on Dec. 31, 2010.

The company has reaffirmed its revenue guidance at $290 million for full year 2010, and net income to range between $22 and $24 million. Feihe had provided the same guidance late March, which is above analysts' consensus estimate polled by Reuters.

5. Telestone Technologies ( TSTC) is an access network solutions provider serving the Chinese market. The company's solutions include research and development, and application of access network technology with products like repeaters, antennas, and radio frequency peripherals. The stock has gained 16.6% in the last one month.

The analyst covering the stock assigns a buy rating on it. Data from Bloomberg has analysts forecasting 80.5% gain to $12.0 in the upcoming 12 months.

Total revenue for the first quarter of 2011 grew 30% to $14.5 million from the year-ago quarter. Gross profit for the quarter increased 33.6% to $6.6 million, with gross margin expanding 120 basis points to 45.6%. The company swung to a net income of $1.6 million or 13 cents per share from a net loss of $1.1 million or 11 cents per share in the first quarter of 2010.

The company estimates full year 2011 revenue to increase by 30% to $171 million and net income to surge by 10% to $27.5 million, or $2.22 per diluted share. Telestone expects $123.1 million as accounts receivable in 2011. Meanwhile, revenue for 2012 is seen doubling to $342 million.

4. China Techfaith Wireless Communication Technology ( CNTF), a China-based holding company, provides originally developed mobile phone products focusing on the design and development of handsets and sales of finished products to local and international customers. The company operates in three business segments: sales of products, handset design services, and games. The stock has gained 42.2% during the past one month.

Net revenue for the first quarter of 2011 rose 29% to $78.7 million from the year-ago quarter. Gross margin improved to 32% from 22% earlier. Net income stood at $13.8 million or 26 cents per share, compared to $7.1 million or 7 cents per share in the year-ago quarter.

Techfaith recently established a joint venture with Beijing E-town International Investment and Development, by investing $46.2 million for a 60% share. The JV will develop a 10 million-unit capacity smart phone production line in Beijing.

The company's revenue guidance for the second quarter of 2011 is in the range of $82 to $84 million. Additionally, Techfaith forecasts gross margin to track the first quarter of 2011 levels. Besides, with the launch of 17Vee motion gaming console box in the second quarter of 2011, the company expects sales of the motion gaming device to escalate. In addition, Techfaith plans to launch six new mobile phones on Android-based solutions.

3. Fuwei Films (Holding) ( FFHL), develops, manufactures and distributes plastic films using the biaxially oriented stretch technique, known as BOPET film (biaxially oriented polyethylene terephthalate). The company has its operations spread across China. The stock has gained 66.4% during the past one month.

Total revenue for the first quarter of 2011 surged 96.9% to $26.5 million from the year-ago quarter. Specifically, the share of specialty films sales grew to 22.9% from 9.6% in the year-ago quarter. Overseas sales jumped to 33.4% of total revenues from 12.8%. Gross margin increased to 25.9% from 14.4% recorded in the prior-year quarter. Net income multiplied to $3.6 million or 28 cents per share from $40,659 in the same period a year ago.

Fuwei Films said that the demand for its high-margin specialty film sales has increased and expects it to contribute significantly to its total revenue in the upcoming quarters. Encouraged by higher demand for its products from Europe and South Korea, the company plans to main its product differentiation strategy.

2. eLong ( LONG), an online travel service provider in China, mainly offers services through the modern call center and web-based distribution technologies. Through its network, it enables customers, both in Chinese and English languages, to book rooms at discounted rates at over 10,000 hotels in over 450 cities across China, and air ticket reservations in over 80 cities across China. The stock has gained 67.5% in the last one month.

Recently, TheStreet Ratings upgraded the stock's rating to buy from hold, based on strong revenue growth, expanding profit margins and impressive performance.

Net revenue or the first quarter of 2011 increased 23% to $19 million as compared to the year-ago quarter. For the same period, net income zoomed 30% to $1.2 million. For the first quarter, hotel room bookings soared 41% year-over-year. Meanwhile, Tencent Holdings has announced the acquisition of a strategic 16% stake of eLong's outstanding shares for a purchase price of $84.4 million, becoming the second largest shareholder of eLong.

The company's revenue guidance for the second quarter of 2011 is between $21.1 million and $22.9 million, indicating a 15% to 20% increase from the second quarter of 2010.

1. Orsus Xelent Technologies ( ORS), operating through its wholly owned subsidiary Beijng Orsus Xelent Tech& Trading Company (Xelent), engages in designing and distributing cellular phones for retail and wholesale distribution. The stock has gained 155% in the last one month.

Net income for the first quarter of 2011 was $32.03 million or $12.73 per share, compared to a net loss of $454,000 or 18 cents per share in the year-ago quarter. Additionally, stockholders' equity at the end of the first quarter was $27.54 million as compared to an accumulated stockholders' deficit of $4.5 million in the corresponding quarter a year ago.

Going forward, the company said that it is seeking to improve operations and adjust marketing developments strategies to acquire more cash. In its operating plan, the company plans to enter new developing markets such as Africa for their 3G products. The company is also seeking to align its R&D efforts to meet the requirements of telecom operators and market trends in China.

>>To see these stocks in action, visit the Top 10 Emerging-Market Stocks portfolio on Stockpickr.

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