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EEM: Emerging Markets Stocks Remain Undervalued With Implied Returns Of Over 10%

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  • EEM invests in various emerging markets.
  • The fund is exposed to some fairly risky territories like China, but all considered, the fund is quite diversified and looks inexpensive.
  • Implied returns are over 10%, even if I "under-estimate" earnings growth rates as compared to consensus analyst estimates.
  • Due to the lack of historical outperformance, I would not recommend a high allocation to EEM.
  • Nevertheless, some exposure to EEM could make sense due to the cheapness of the valuation, and the implicit short-USD hedge.

Stock market graph hologram, night panorama city view of Bangkok, popular location to gain financial education in Asia. The concept of international research. Double exposure.

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iShares MSCI Emerging Markets ETF (NYSEARCA:NYSEARCA:EEM) is an exchange-traded fund that enables investors to get exposure to mid- and large-cap emerging market stocks. The breadth of EEM is high, with 1,242 holdings reported as

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Providing commentary and analysis, principally focused on global macro, foreign exchange, and equities as an asset class. Primary interests include equity investing from an international perspective, and FX fair values.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

EUM remains undervalued....
Emerging Markets have been touted as the sector to be in the last three years. Until the 10,000 lb gorilla (China) start seeing stocks rise this sector as a whole is DOA
@Tileman78 You've seen analysts touting EEM every year, seems like a seasonal thing like baseball but the past 5 years chart tells the story. The narrative has not played out as advertised.
Now it's gotten even worse. If Russia defaults, EMs will suffer that's why the Eem has been tanking this year!
Also consider cheaper ETF VWO (Vanguard).
Sperry8 profile picture
@JohnB Exactly. It's ridiculous the author even discussed EEM with it's absurdly high expense ratio when there are almost identical emerging funds with much lower ERs
You can not whip a dead horse. If you are forced to look elsewhere, consider EMXC.
Tim.barnes9 profile picture
If one believes equities will do well this year this is a great play. Investors will hunt yield and value in that scenario. I think China will be market friendly this year due to their need to attract more foreign capital, and an opportunity to take advantage of weak US leadership.
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