Zacks Investment Ideas feature highlights: Brasil Telecom, TOTAL, Orix, Mechel
OAO and Market Vectors Russia ETF
CHICAGO, Jan. 5, 2012
CHICAGO, Jan. 5, 2012 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: Brasil Telecom (NYSE: BTM ), TOTAL (NYSE: TOT ), Orix
Corporation (NYSE: IX ), Mechel OAO (NYSE: MTL ) and Market Vectors Russia
ETF (NYSEARCA: RSX ).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO )
4 International Stocks for 2012
For the first time in a long time , the good ol' US stock market was one of
the top performers this past year. And it remains a top investment choice as
we begin the New Year.
Although far from robust, the US economy should provide 'good enough' growth
to drive healthy earnings growth in 2012. And given that the S&P trades at
just 12x earnings, stocks look very attractive, especially next to cash or
Meanwhile, Europe is facing a mild recession at best as it implements painful
but necessary austerity measures, and Japan appears stuck in a perpetual 'Lost
Decade.' And the former untouchable BRICs just posted their second consecutive
year of stock market underperformance as their economies all face mounting
But don't write off international stocks completely in 2012.
Price Doesn't Always Equal Value
During periods of heightened fear in the markets, stocks around the globe tend
to move in one direction: down. Europe, Asia and Latin America all got hit the
hardest in 2011 as investors fled to the relative safety of the US, buying up
blue chips, the US dollar and Treasuries.
And it's exactly when price decouples from value that creates the best
opportunities for value investors. The often quoted but seldom followed advice
from Warren Buffett is to "be greedy when others are fearful". In this case,
that means investing in companies headquartered in the hardest-hit markets of
4 International Stocks for 2012
Brazil - Brasil Telecom (NYSE: BTM )
People used to joke that Brazil was "the country of the future, and it always
will be". But it looks like this bustling Latin American country of 195
million may finally be arriving. Although Brazil's economic growth in 2012 may
not be quite as robust as in years past, where do you think the economy will
be will be five or ten years from now? My guess is significantly higher.
And there to capitalize on that growth will be Brasil Telecom, which provides
telecommunications services throughout the country. This unloved stock trades
at just 4x 2012 EPS and 0.2x book value. Oh, and it pays a dividend that
yields a solid 3.0%.
France - TOTAL (NYSE: TOT )
It seems like everyone wants to short Europe these days. Buying shares of this
French oil and gas company would fly in the face of conventional wisdom. And
that's just fine for the contrarian.
For the first 9 months of 2011, sales were up 15%, EPS up 16% and cash from
operations up 11%. But with shares trading at just 7x 2012 consensus EPS, it
seems like investors have priced in a pretty big economic slowdown in 2012.
If the global economy isn't as bad as feared in 2012 and oil prices don't
crash, expect another year of solid results for this European company. And
that could mean big gains for this discounted stock. In the meantime,
investors will be rewarded with a hefty 5.1% dividend yield.
Japan - Orix Corporation (NYSE: IX )
Remember when Japan was going to take over the world? Well, two 'Lost Decades'
later, and the country is barely on investors' radar screens these days (look
at all the 'Asia ex-Japan' funds out there). But this has caused some strong
Japanese companies to be overlooked.
Formed in 1964, Orix Corporation is a diversified financial services company
operating in 6 segments: Corporate Financial Services (15% of revenue),
Maintenance Leasing (9%), Real Estate (25%), Investment & Operation (8%),
Retail (28%), Overseas Business (15%). Unlike some of its former competitors,
Orix managed to stay profitable throughout the financial crisis and is
expected to grow EPS at a healthy clip over the next few years.
Nevertheless, shares trade at just 0.5x book value and 8x forward earnings.
And its PEG ratio is an attractive 0.65 based on a long-term growth rate of
Russia - Mechel OAO (NYSE: MTL )
Arguably the least favorite of the BRIC countries the last couple of years has
been the 'R': Russia. In fact, the Market Vectors Russia ETF (NYSEARCA: RSX
) is down more than 40% since the beginning of 2008. Although the country
still faces many challenges, Russia is expected to see healthy economic growth
And many solid Russian companies have gotten their teeth kicked in as
investors shun the country. Mechel is one of those companies. It is the
largest coking coal producer and sixth-largest steel producer in Russia.
Through the first 9 months of 2011, revenue was up +38%, with operating income
Despite this, shares trade at just 3x the 2012 Zacks Consensus Estimate. It's
also trading at only 0.7x book value. These multiples could rapidly expand if
the low expectations for the global economy improve. Another potential
catalyst: the Russian presidential election in March.
The Bottom Line
Considering how awful 2011 was for international stocks, the US had a
relatively good year. And the US is still among the favorites to outperform
this year. But don't count out foreign stocks completely in 2012. These 4
international stocks look like bargains.
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