Jeremy Grantham, the co-founder of investment firm GMO, believes that we are in the middle of a ‘superbubble’ that spans across major asset classes, such as bonds, stocks, real estate, and commodities. Grantham warns that this superbubble could culminate in $35 trillion in losses of value in the United States when pessimism returns to the markets. Grantham suggests that investors should look to avoid overvalued U.S. equities and the red-hot real estate market. Instead, investors can add value stocks from of companies based in emerging countries.
The current stock market correction may be an early indication of the impending superbubble burst; the benchmark indexes witnessed their worst week since the onset of the pandemic in March 2020.
Given this backdrop, we think it could be wise to add quality value stocks from emerging markets Vale S.A. (VALE), América Móvil, S.A.B. de C.V. (AMX), and Coca-Cola FEMSA, S.A.B. de C.V. (KOF) to one’s portfolio.
Vale S.A. (VALE)
Headquartered in Rio de Janeiro, Brazil, VALE is a global producer of nickel, iron ore, and iron ore pellets, which are the key raw materials for steel making. The company also produces copper, metallurgical and thermal coal, potash, phosphates and other fertilizer nutrients, manganese ore, ferroalloys, platinum group metals, gold, silver, and cobalt.
On Dec. 21, 2021, VALE announced that it will sell its Moatize coal mine in Mozambique and a connected railway corridor to Vulcan Minerals. The deal includes a 10-year royalty contract related to the mine’s production and coal price conditions. The sale should help VALE reduce its carbon footprint and focus on its core businesses.
VALE’s net operating revenues increased 17.8% year-over-year to $12.68 billion for the third quarter, ended Sept. 30, 2021. The company’s adjusted EBITDA increased 13.8% year-over-year to $6.93 billion. Also, its net income increased 33.6% year-over-year to $3.88 billion.
In terms of forward EV/EBITDA and P/S, VALE’s respective 2.52x and 1.40x are lower than the 7.61x and 1.52x industry averages. Furthermore, its 3.28x forward Price/Cash Flow is 60.5% lower than the 8.33x industry average.
Analysts expect VALE’s EPS and revenue for fiscal 2021 to increase 341.1% and 34%, respectively, year-over-year to $4.19 and $54.19 billion. The stock has gained 17% over the past three months to close the last trading session at $15.60.
VALE’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Value and Quality. It is ranked #3 of 34 stocks in the Industrial – Metals industry. Click here to see the additional ratings of VALE for Growth, Momentum, Stability, and Sentiment.
América Móvil, S.A.B. de C.V. (AMX)
Headquartered in Mexico City, AMX provides telecommunications services in Latin America. The company offers wireless and fixed-voice services. It also provides data services, such as data centers, including internet access, messaging, data transmission, email services, content streaming. In addition, it provides residential broadband services and IT solutions for small businesses and large corporations.
On Nov. 23, 2021, AMX announced that it had closed the sale of its TracFone wireless unit for more than $3.6 billion in cash to Verizon Communications Inc. (VZ). The transaction also involved AMX receiving 57.60 million shares of VZ.
For its fiscal third quarter, ended Sept.30, 2021, AMX’s EBITDA increased 1.3% year-over-year to MXN$87.59 billion ($4.27 billion). The company’s EBIT increased 4.7% year-over-year to MXN$47.24 billion ($2.30 billion). Also, for the nine months ended Sept. 30, 2021, its net income came in at MXN$60.43 billion ($2.94 billion), compared to MXN$9.54 billion ($0.46 billion).
In terms of forward EV/S and P/S, AMX’s respective 1.90x and 1.26x are lower than the 2.41x and 1.72x industry averages. Furthermore, its forward 5.65x EV/EBITDA is 38.5% lower than the 9.19x industry average.
For the quarter ending March 31, 2022, AMX’s EPS is expected to increase 1,000% to $0.33. The company’s revenue for its fiscal year 2021 is expected to increase 4.3% to $49.39 billion. Over the past year, the stock has gained 36.2% in price to close the last trading session at $19.32.
AMX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Value and Quality. Within the A-rated Telecom – Foreign industry, it is ranked #7 of 48 stocks. To see the other ratings of AMX for Growth, Momentum, and Sentiment, click here.
Coca-Cola FEMSA, S.A.B. de C.V. (KOF)
KOF is based in Mexico City, Mexico. The company is the largest franchise bottler of Coca-Cola trademark beverages in the world by sales volume. It produces, distributes, and markets certain Coca-Cola beverages. Its segments include the Mexico and Central America division; the South America division; and the Asian division.
KOF’s revenue increased 3.3% year-over-year to MXN$48.32 billion ($2.35 billion) for the third quarter ended Sept. 30, 2021. The company’s net income increased 38.8% year-over-year to MXN$ 3.42 billion ($0.17 billion). Also, its gross profit increased 2.1% year-over-year to MXN$ 21.81 billion ($1.06 billion).
In terms of forward EV/S and P/S, KOF’s respective 1.42x and 1.20x are lower than the 1.93x and 1.43x industry averages. Furthermore, its 16.52x forward non-GAAP P/E is 14.4% lower than the 19.32x industry average.
Analysts expect KOF’s EPS and revenue for fiscal 2021 to increase 38.4% and 9.5%, respectively, year-over-year to $3.17 and $9.36 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 14.8% in price to close the last trading session at $53.24.
KOF’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. It is ranked #2 of 35 stocks in the B-rated Beverages industry. Click here to see the other ratings of KOF for Growth, Momentum, and Sentiment.
VALE shares were trading at $15.03 per share on Monday morning, down $0.57 (-3.65%). Year-to-date, VALE has gained 7.20%, versus a -10.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
Believe Jeremy Grantham? Then Buy These 3 Value Stocks in Emerging Markets as the U.S. Approaches the End of a ‘Superbubble’ StockNews.com
