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With hedge fund manager, CNBC regular and long-time veteran of the Russian markets Tim Seymour at the helm, Emerging Money (http://www.emergingmoney.com) provides education, trading analysis and comprehensive views of emerging markets around the world. As economies in the BRIC group and beyond... More
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  • Emerging Markets: GGB looking a little rich with a strong real, look into SOL on pullbacks  0 comments
    Nov 5, 2010 5:51 PM | about stocks: CTCM, INXX, BRAQ, SOL

    Now that last week's big macro and monetary policy events are out of the way, traders have time to return to earnings reports that were ignored in the news tsunami. Here are a few tickers on our radar.

    Brazil: Gerdau (GGBquote) may be looking a little rich after its latest earnings report proved that Brazilian steel companies are on the defensive.

    GGB saw its third-quarter revenue jump 20% on global demand for steel, but iron and coal costs rose even faster, leaving its operating margin at 15%. As a result, net income sank 7% on an annualized basis.

    The news came as a pleasant surprise to analysts who expected worse results, but unless Brasilia can weaken the real significantly, it looks like even less bullish numbers are on the horizon.

    RUSSIA: CTCM Media (CTCMquote) delivered solid quarterly revenue growth, but shares are still drifting as this Russian broadcaster fails to improve its margins.

    If anything, CTCM is becoming a potential value story even though the company is also growing its top line at a rate of about 25% year-over-year. And if nothing else, it provides rare direct exposure to Russia's consumer economy -- handy in a market filled with export-driven resource plays.

    CHINA: Renesola (SOLquote) crushed Wall Street estimates with its latest numbers. Is this solar stock fully valued?

    In fact, SOL got a bounce on Wall Street right after it reported a relatively triumphant third quarter -- 12% more revenue and a spectacular 34% more profit than analysts expected. But the 8% gain proved fleeting as traders took profits early, leaving shares down slightly by the closing bell.

    Monday trading will be interesting. This may be a stock that people buy on the dips. After all, if someone was buying it when it was 8% higher, this solar manufacturer may be even more attractive now.

    ETFs in the Spotlight

    Brazil's retail boom has sent consumer fund BRAQ (quote) up 34% since its July debut. But now that the underlying stocks have gotten expensive, can the gains continue?

    Retail accounts for about 24% of BRAQ's holdings, with names like Lojas Renner in the Top 10. These stocks have done extremely well this year, but now that they have run up, they trade at about 50 times current-year profits -- about three times as rich as the 14.4 P/E for the overall Bovespa!

    Given that kind of valuation, it is no wonder that local hedge funds have tarted lightening their retail holdings.

    Massive infrastructure development could unlock India's potential as "the next China" in the BRIC.INXX (quote) is naturally exposed to that story.

    In theory, simply modernizing India's roads, power plants and other infrastructure will pump $1 trillion back into the local economy and theoretically push GDP expansion to 9.5% a year. As a result, INXX has already gained 10% since launching in August . . . and as a bonus, none of its core holdings are available in ADR format, so U.S. investors who want a piece of the $1 trillion boom will be hard pressed to get it anywhere else.

     

    Disclosure: no positions
    Themes: Brazil, China, BRICs, solar, steel, India, ETFs, ADRs Stocks: CTCM, INXX, BRAQ, SOL
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