Hot Emerging Markets
Stocks in emerging Europe, the Middle East, and Africa will rise 31% by the end of 2010 as cheap valuations, fast profit growth, and higher oil prices draw investors, according to a Dec. 3 Morgan Stanley (MS) report.
Michael Wang, the company's London-based emerging-markets strategist, wrote that the gain he expects from the MSCI EM EMEA (Emerging Markets Europe, Middle East, and Africa) Index would exceed the 20% estimated gain for global emerging markets. EMEA stocks trade at a 30% discount to global peers in the MSCI Emerging Markets Index on a price-to-earnings basis, Wang writes, and profits in the regions are expected to grow 46% in 2010. Energy and raw materials companies make up 40% of the index. For a broad play, Fidelity's Emerging Europe, Middle East, & Africa EMEA Fund (FEMEX) buys stocks in all three regions. A number of exchange-traded funds, including Claymore/BNY Mellon Frontier Markets ETF (FRN) and PowerShares MENA Frontier Countries Portfolio (PMNA), also invest in frontier nations in these areas.
Price Is Right?
After shunning large lending companies, billionaire value investor Michael Price bought shares of Bank of America (BAC) in its $19.3 billion equity sale on Dec. 3, and says he plans to buy more. The company, whose stock fell 66% in 2008, plans to repay $45 billion in Troubled Asset Relief Program (TARP) funds.
Price says Charlotte (N.C.)-based BofA is the only large U.S. bank that he owns. Its price could rise above $20 if profit reaches $2 a share, he says. The average per-share profit estimate of analysts surveyed by Bloomberg is 96 cents for 2010 and $2.10 for 2011. BofA's stock is up about 10% this year.
Jeffrey Gundlach: A TCW Bond Star Is Booted
Is the high number of recent departures from TCW (TSI) a sign that it's time for investors to bail out of its bond funds? Following the Los Angeles-based asset manager's Dec. 4 announcement that Chief Investment Officer Jeffrey Gundlach had been "relieved of his duties," the remaining members of his team have resigned, according to Bloomberg. Since his ouster—said to be due to internal power struggles—Gundlach has said he's considering starting his own firm, a prospect likely to intrigue investors: Over the past 10 years that Gundlach has managed the TCW Total Return Bond Fund (TGLMX), he's bested Bill Gross's Pimco Total Return Fund by almost 4 percentage points. The TCW fund's assets have swelled to nearly $12 billion, thanks to Gund-lach's navigation of the mortgage securities market at the height of the credit crisis. Eric Jacobson, Morningstar's (MORN) head of fixed income research, says "there's no immediate need to go anywhere." TCW, he notes, has brought in a group of managers from Metropolitan West Asset Management who can, for now, "credibly and ably manage the money."