Right now, it’s easy to be down on the global stock market. While the U.S. market is off about 7% so far in 2022, emerging market stocks are about 10% lower than where they were to start the year.
And with the ongoing conflict in Ukraine and inflation at its highest level in decades, it can be hard for investors to see the forest for the trees.
But those willing to look past the short-term struggle in global stocks could find opportunities for high-quality bargain plays in emerging markets such as China, Brazil and India.
These economies have long-term growth potential from emerging consumer and technology trends, and as the pressures caused by the coronavirus pandemic are abating there could be some significant upside in select names across these regions.
Here, we look at 11 top-rated emerging market stocks. The names featured here are some of the best EM plays from several of the biggest developing nations, and each boasts consensus Buy or Strong Buy recommendations from Wall Street’s pros.
Data is as of April 18. Analysts’ consensus recommendations courtesy of S&P Global Market Intelligence. Stocks listed in reverse order of analysts’ consensus recommendations.
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InfosysGetty Images
Country: IndiaMarket value: $89.1 billionAnalysts’ consensus recommendation: 2.27 (Buy)Infosys (INFY, $20.56) is a consulting, technology and outsourcing firm based in India, but it services clients around the world. INFY’s many offerings include digital banking and insurance solutions, e-commerce platforms, digital learning infrastructure and data and artificial intelligence (AI) toolsets. Its top clients include Rolls-Royce (RYCEY), oil giant BP (BP) and mega-miner Newmont (NEM), to name a few.
In many ways, INFY is exemplary of the next generation of opportunities among emerging market stocks as it isn’t a straightforward manufacturer or materials company. Instead, it’s a digital native that is focused on providing cost-efficiencies to clients using a skilled workforce – in other words, a model that is popular across the digital economy of the developed world.
Infosys has aims at being much more than just an emerging market consulting fIrm, too. It recently entered into an agreement to acquire Oddity, a German-based digital marketing, experience and commerce agency whose clients include Porsche and Walt Disney (DIS). This signals clear ambition from INFY to hang with the biggest names in the space.
And this strategy has worked well for the company. “Since fiscal 2019, Infosys’ actual growth in any year has been higher than upper end of its growth guidance by 0.3-6%,” says Jefferies analyst Akshat Agarwal (Buy).
The analyst prefers INFY to global heavyweight Accenture (ACN) thanks to its “strong growth outlook” and the chance it will better capitalize on recent tailwinds in the space. That’s a big vote of confidence for the long-term growth potential of this tech stock.
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Dr. Reddy’s LaboratoriesGetty Images
Country: IndiaMarket value: $9.3 billionAnalysts’ consensus recommendation: 2.00 (Buy)Dr. Reddy’s Laboratories (RDY, $55.32) offers a unique investment in one high-growth area of emerging market stocks – healthcare. Just as many consumers and businesses in fast-growing regions are adapting to the high-tech tools of a digital age, the healthcare systems of emerging markets are also investing heavily in modern medical infrastructure to serve a population that increasingly demands best-in-class care.
Dr. Reddy’s is an integrated pharmaceutical company, primarily focused on production of generic and over-the-counter drugs. While these aren’t necessarily high margin, they are in high demand. And considering India has 1.4 billion residents, selling maintenance drugs and medication for common colds can still be a very big business for a firm like RDY.
Revenue is steadily growing, with projections of roughly 9% growth in fiscal 2022 and 10% in fiscal 2023.
And looking forward, investors may be interested in the efforts at Dr. Reddy’s to develop proprietary pharmaceuticals for cardiovascular disease, neurological disorders and other conditions. If the research pipeline bears fruit, this could result in significantly higher margins as this EM stock moves beyond generics and into a reliable suite of branded products with patent protections. And with research and development (R&D) expenses at just about 9% of total sales, there is ample room to increase spending on these opportunities without breaking the bank.
Lastly, it’s noteworthy that, in the near term, Dr. Reddy’s is at the forefront of local COVID-19 responses through partnerships on treatment options as well as vaccines. This might not be a long-term catalyst, but considering that many emerging markets such as India are behind the curve in their coronavirus response, there should continue to be a bit of a tailwind for these operations in 2022.
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Banco BradescoGetty Images
Country: BrazilMarket value: $44.5 billionAnalysts’ consensus recommendation: 1.89 (Buy)Brazilian banking giant Banco Bradesco (BBD, $4.19) is not a fly-by-night financial stock. This is a roughly $45-billion powerhouse that is larger than most U.S. regional banks, and has a rich history and deep connections across Latin America.
Because of its scale and influence, BBD is a great way to play the general uptrend in economic activity across the region. Lately, we’ve seen the convergence of several factors lifting companies in Brazil and its neighbors, from commodity price inflation boosting margins for mining and energy stocks to trade disruptions sparked by the Ukraine war increasing demand for key South American materials. On top of that, there’s the long-term growth potential of an emerging middle class across Brazil, Argentina, Columbia and other nations in the region.
Throw in a rising interest-rate environment, which is generally good for all financial firms, and that makes Banco Bradesco one of the best EM stocks out there right now.
UBS analysts have a price target of about $6 on BBD – representing implied upside of more than 43% to current levels. What’s more, Banco Bradesco is their “top pick in LatAm” thanks to a strong earnings outlook and margins that should come in better than expected.
Brazil is the largest nation in Latin America, both by population as well as economic output, and the fact that the country has finally turned a corner of COVID-19 in 2022 could mean brighter days are ahead. Banco Bradesco is a great way to play the imminent recovery and future growth of this emerging market.
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Grupo TelevisaGetty Images
Country: MexicoMarket value: $6.2 billionAnalysts’ consensus recommendation: 1.58 (Buy)Grupo Televisa (TV, $10.98) is a roughly $6-billion enterprise, offering cable and satellite TV, landline and mobile telephone service and fiber optic internet access across the Spanish-speaking world in Latin America. Beyond its core business of connectivity, the company also operates as a media company with television programming, digital content syndication and sports-related entertainment offerings.
In emerging markets, one of the core growth narratives centers around media and telecom. While penetration of cable and internet access is at almost 100% in many Western markets, only about 71% of Mexico has internet access at present. That’s a big growth opportunity for this communication services stock in the years ahead.
What’s also interesting about Grupo Televisa is that it has a good mix of legacy telecom along with mobile offerings including cellular data service, streaming media and satellite TV. This allows it to capitalize on current growth potential as well as ward off potential disruption down the road from 21st century wireless competition.
There’s a lot of potential for this company to fend off outside competition from outside Latin America, too. Grupo Televisa recently completed a massive $4.8-billion merger with U.S.-based programming powerhouse Univision Holdings to ensure it remains the No. 1 Spanish-language option in the region for many years to come.
With TV shares up about 17% so far this year in the wake of the merger and strong analyst commentary lately, the outlook for this emerging market stock is bright in 2022.
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NioGetty Images
Country: ChinaMarket value: $35.1 billionAnalysts’ consensus recommendation: 1.58 (Buy)There has been a lot of press over the last year or so about how electric vehicle (EV) giant Tesla (TSLA) built its first manufacturing facility outside the U.S. in China. However, local play Nio (NIO, $19.17) is perhaps a more direct way to play the EV revolution in the mainland, as this company is growing fast and has homegrown connections that could pay off in a big way.
First, it’s important to acknowledge the growth story of NIO is impressive in its current state. For fiscal year 2022, analysts expect to see nearly 70% revenue growth followed by roughly 60% top-line expansion in fiscal 2023. The car stock is also moving closer to profitability as it scales up rapidly. If projections hold, Nio will be above break even late next year.
But the how and the why of that growth makes it even more impressive. While Tesla has moved into China, Nio itself is now expanding to another one of the biggest EV markets in the world – Europe. The Chinese electric vehicle manufacturer opened its first showroom in Norway back in September, and has said that it plans to enter four more European markets in 2022.
This is not a niche emerging market play. Rather, NIO is an exciting and disruptive company that is looking to capitalize on the global potential of EVs … and just happens to be headquartered in China.
No wonder analysts are bullish on this emerging market stock. UBS Global Research analyst Paul Gong recently upgraded the stock to Buy as recent volatility and concern over battery prices and margins has waned. Mizuho analysts, meanwhile, put a stunning price target of $60 on shares – three times current levels!
There’s clearly a lot of potential here based on the general uptrend in EV adoption and the specific strength of Nio right now.
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Alibaba GroupGetty Images
Country: ChinaMarket value: $261.8 billionAnalysts’ consensus recommendation: 1.50 (Strong Buy)It’s no secret that Alibaba Group (BABA, $94.71) has had its fair share of struggles in recent years.
Most notably perhaps was in late 2020 when Jack Ma, founder of the e-commerce giant, criticized Beijing’s approach to innovation. The billionaire was ultimately forced out of public view as regulators made a show of “investigating” the company, which sent shares retreating from all-time highs. But Ma emerged from the shadows in 2021, the company got some slap on the wrist penalties from Beijing and it is no longer under the microscope.
Shares have continued to decline over the last 15 months or so amid broad-market headwinds, but this could have created an opportunity to buy one of the best emerging market stocks at a discount. And Alibaba has shown signs of stabilizing recently, with the stock up 28% from its March lows.
Looking forward, the long-term growth of BABA stock should help define the narrative. Analysts expect roughly 20% top-line growth in fiscal 2022. What’s more, Alibaba just increased its stock buyback program to $25 billion from $15 billion. This marks the second hike in less than a year and sends a clear signal that Alibaba thinks the relatively depressed levels of late are an opportunity to snap up shares and drive long-term value for stockholders.
There’s certainly still political risk, including BABA’s relationship with Russia and the continued uncertainty in both the local regulatory picture as well with the U.S. Securities and Exchange Commission (SEC). But there’s also potential for a big snapback as the dust settles on this Asian e-commerce giant.
In fact, Mizuho analyst James Lee recently suggested BABA stock is nearing an “inflection point” as it begins to move past its former troubles, and put a stunning price target of $180 on BABA stock. That’s roughly 90% upside from current – and investors who even capture a portion of those gains will cash in.
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BaiduGetty Images
Country: ChinaMarket value: $46.3 billionAnalysts’ consensus recommendation: 1.50 (Strong Buy)The story for Chinese internet giant Baidu (BIDU, $126.73) is similar to Alibaba insofar as the regulatory picture hasn’t been particularly rosy.
For roughly two years, there have been fears that the U.S. could go as far as delisting this company and others from major exchanges. And this has been coupled with concerns that Chinese policymakers would begin taking a hard line on regulating tech stocks.
But as BIDU begins to get past some of these overhangs, its value proposition continues to shine. For starters, the tech company is largely insulated from international competition thanks to the blessing of Beijing regulators and the lack of outside players that are willing to jump through the same hoops. Consider that Baidu operates one of the largest search engines in the world, with a staggering 84% market share in China.
Regardless of what you may think about its willingness to play ball with local politicians, that dominance can’t be discounted – and neither can Baidu’s fundamentals. Its “core” advertising unit saw 21% revenue growth in 2021. And in a sign of increasing diversification, non-advertising revenues surged by 71% last year as it pushes into cloud computing, self-driving cars, digital entertainment and other offerings.
While there is a unique reliance on a favorable regulatory picture at BIDU, analysts at UBS do not seem concerned. A recent research report from the firm points to “disciplined growth with policy support,” which nicely sums up the opportunity here in this emerging market stock.
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ICICI BankGetty Images
Country: IndiaMarket value: $69.0 billionAnalysts’ consensus recommendation: 1.33 (Strong Buy)Shares of ICICI Bank (IBN, $19.55) may be down slightly for the year-to-date, but the major Indian financial firm has tremendous long-term growth potential. The institution is one of India’s top two banks, and is a fairly direct way to play economic expansion in this region thanks to its key role in business and consumer activity alike.
India’s economy took a hit because of the pandemic, as did many nations, but expanded with 5.4% annualized gross domestic product (GDP) growth in the last quarter of 2021. This was under previous estimates – and accounts for some of the sluggishness lately in ICICI Bank’s stock. However, the International Monetary Fund projects real GDP growth to accelerate by 9.0% in 2022 – one of the highest rates of all major economies. And this could benefit ICICI Bank.
IBN will likely see a continuation of its “strong momentum,” says UBS Global Research analyst Vishal Goyal (Buy). Growth for ICICI comes from “market opportunity and the banks focus on leveraging branch banking for customer acquisition, process streamlining and tech/digital enabled cross-sell, the analyst writes in a note.
For more risk-averse emerging market investors, it’s worth noting that this isn’t just a growth play on the potential of GDP expansion, either. ICICI has active subsidiaries in Canada, the U.K. and the U.S., with a significant asset pool of some $18 billion as of the end of 2021. IBN stock even pays a modest dividend the same way financial institutions in the West do. That should provide peace of mind for those who are interested in emerging market stocks but want to seek out less volatile offerings in these regions.
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NetEaseGetty Images
Country: ChinaMarket value: $64.4 billionAnalysts’ consensus recommendation: 1.33 (Strong Buy)The digital revolution is expanding in emerging markets, which is good news for NetEase (NTES, $93.48). The provider is akin to the early incarnations of AOL, with offerings that include basic connection to the internet along with tools like messaging, email, and online tools like educational courses and digital translators.
This growth area alone would be impressive, but NetEase hasn’t stopped with just the basics. It does a brisk business by offering other services including e-commerce platforms and video games to internet customers.
This latter proposition is perhaps the most interesting. While it was possible to write gaming off as just kids stuff a few decades ago, the profit potential here cannot be ignored.
Consider that according to a games market analysis firm NewZoo, the games market generated more than $180 billion in 2021 from roughly 3 billion customers. As more than 55% of these players are based in Asia-Pacific, NTES is really cashing in. And it’s doing so with its original titles, as well as licensing deals to offer hit games like Overwatch and Minecraft within China.
After what CFRA Research analyst Ahmad Halim (Buy) called a “blockbuster” fourth-quarter earnings report for NTES, this emerging market stock is riding high on expectations of double-digit revenue growth going forward.
And with continued innovation in everything from online learning platforms to cloud music services, there is a lot in the pipeline at NetEase to ensure it remains one of the region’s dominant digital powers.
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JD.comGetty Images
Country: ChinaMarket value: $102.4 billionAnalysts’ consensus recommendation: 1.32 (Strong Buy)In case you couldn’t guess from the dot-com moniker, JD.com (JD, $57.50) is an internet company. Its focus is on consumer-driven e-commerce, as well as supply-chain technologies and services that cater to businesses across the People’s Republic of China. It’s also a top stock pick among billionaire investors.
Sometimes referred to as the “Amazon of China,” JD offers everything from consumer electronics to home appliances to furniture to cosmetics. And like Amazon.com (AMZN), it offers a robust online marketplace of third-party merchants, with services that include marketing and “omni-channel” solutions to offline retailers that want to use its extensive e-commerce platform.
JD’s comprehensive approach makes it much more than just a play on emerging market consumer trends. After recent earnings that impressed on both the top and bottom lines, Mizuho analysts applauded JD’s “strong execution due to its competitive advantage in supply chain and logistics.”
The company is expanding rapidly, with revenue growth of nearly 20% expected for both this fiscal year and next. If those projections hold, JD.com will top $210 billion in revenue – which would put it on par with U.S. retail giant Costco (COST) and nearly double the sales of blue-chip drugstore giant Walgreens Boots Alliance (WBA).
Admittedly, the growth hasn’t been without challenges. JD recently announced plans to cut between 10% to 30% of its workforce, an across-the-board move that will touch almost every department.
However, long-term investors may actually be encouraged by this move as the sprawling e-commerce company is thinking realistically about staffing and pulling back on areas that are underperforming. Considering it’s in the middle of regulatory approval to acquire and incorporate another major digital retail platform in the region, Dada Nexus (DADA), this kind of stock-taking is well-timed and could drive future efficiencies for this emerging market stock.
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SasolGetty Images
Country: South AfricaMarket value: $16.1 billionAnalysts’ consensus recommendation: 1.00 (Strong Buy)The global inflationary environment has caused several disruptions, but it has also created a number of opportunities. Because of this macroeconomic backdrop, one of the best emerging market stocks to look at right now is South Africa’s Sasol (SSL, $25.33). SSL is an integrated chemicals, mining and energy company with its finger in the pies of many different raw materials.
On the energy side, SSL operates coal mines as well as oil and gas wells. The upside of this arm of the business is obvious. Separately, it also is involved in chemicals used in agricultural applications, pharmaceutical production, cosmetic manufacturing and a host of other industries.
In addition, Sasol offers engineering services for materials-based industries, and even takes some of the fossil fuels it has extracted from the ground and operates a regional electric utility.
In other words, SSL may not be the first emerging market stock that springs to mind for investors, but it offers a diversified operation that makes it uniquely positioned to profit right now.
UBS Global Research analyst Steve Friedman has a Buy rating on SSL. There are a host of reasons the analyst is bullish on the African stock, including expectations Sasol will reinstate its dividend later this year amid improving debt metrics.
Considering shares are trading at pre-pandemic levels, there’s a good sign UBS may be right. And adding an income stream on top of a stock that has already put up impressive gains of +50% year-to-date in 2022 makes SSL worth a closer look.