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2013 was a phenomenal year to be invested in stocks. With the S&P 500 rising 25%, it was easy to make money in U.S. stocks. But looking forward to 2014, I’ll be focusing on global values outside of the U.S.
I’ve been bullish for the prospects of America’s economic recovery ever since January 2009. That’s when I took $100,000 of my personal savings and opened a new brokerage account. That account became the basis of an investment letter called The Recovery Portfolio (it’s since been re-named the $100k Portfolio).
In the years since then, I’ve been aggressively investing in great American companies including Apple (Nasdaq: AAPL), FedEx (NYSE: FDX), MasterCard (NYSE: MA) and Pfizer (NYSE: PFE).
This strategy of buying America’s best companies when they were cheap has worked wonderfully well. Our sound investments have delivered returns of 31% in 2013 – beating the S&P 500 index.
But after a year where all major U.S. indices rose, investors should reexamine their overseas investments. Specifically, the best-performing markets in 2014 may NOT be in the U.S. While I remain bullish on U.S. stocks, I’m searching for hidden global values in markets that missed out on the big gains this year.
Two particular opportunities are on my mind today: emerging markets and Europe.
The reason is simply that these markets have dramatically underperformed. Whether you look at a 1-year, 2-year or 5-year period, U.S. stocks have dominated. And that means that the best global values are overseas.
Emerging Markets & Europe: Overdue for a Recovery
But poor historical performance isn’t the reason to invest overseas.
In Europe, the main appeal is that the continent has thus far lagged the U.S. economic recovery. The economic outlook is finally stabilizing in Europe, and there is an opportunity for performance to exceed low expectations.
Those economic concerns have weighed on European stocks. Over the past two years, the Vanguard FTSE Europe ETF (VGK) is up 32% versus 44% gains for the S&P 500.
As a result of that weaker performance, many European stocks are trading at a discount to their U.S. peers. Whether you look at companies in electronics, energy or telecom, European stocks are consistently cheaper than U.S. stocks.
The case for emerging markets is slightly different. These markets are attractive due to their more rapid economic growth.
Consider that the IMF expects economic growth of 2.5% in the U.S. and just 1% in Europe. Compare that with 7% growth in China and 5% average growth of other emerging market economies. Faster economic expansion can make certain emerging markets attractive investments.
Like Europe, emerging markets stocks have also lagged. Over the past two years, the iShares MSCI Emerging Markets ETF (EEM) is up only 9%.
I’m always on the lookout for relatively cheap stocks. And I have had some big successes buying overlooked stocks. Two years ago, my firm published a report titled Top Investments for 2012. In that report, I recommend shares of a struggling entertainment company.
Shares of this stock had plunged 77% in just four months. The stock – which had traded at $300 in the middle of the year – was now trading around $70. And I told my readers that I was “buying the world’s stupidest company.”
That company was Netflix (NASDAQ: NFLX). And my readers and I have been reaping profits from this stock every since December 2011. With shares now trading at $369, we’ve earned a profit of 419%.
Much like Netflix in late 2011, there are still a few very attractive opportunities for value investors. I’m searching the globe for the best undervalued stocks with the potential for +20% gains again in 2014. I’ve already found a handful of ideas – some in the U.S. and others in Europe – that offer investors great companies at attractive prices.
Last week, my company released our latest annual report titled the Best Stocks for 2014. Inside this report, I share two of my top deep value stocks for big profits in the year ahead. I’d like to get this report into your hands before the end of the year.
Inside, you’ll discover the top 10 investment ideas from the team of advisors at Wyatt Investment Research. The best part is that I’ve convinced our marketing team to give this report away as a holiday gift for our customers. To get all the details and to claim your copy, just click here now.