Emerging Market Plays That Soared, or Not, in 2011
Most of my picks turned out well, but alas, not all. My big winners inlcuded Visa and Unilever, and the busts included P&G and Nestle.

My emerging markets investments were a mixed bag last year. My biggest success came from Visa (NYSE:V), ending the year up over 44%.

I loved Visa when I recommended it, and I continue to love it now, even at current prices. But I should be very clear that I do not expect another year of 44% returns. Yes, Visa is still at the crossroads of two powerful macro trends — the rise of the emerging market consumer and the shift toward a global cashless economy — and these are trends I see persisting for years to come.

But 2011 was unique in that the stock had been depressed by political risk stemming from the Durbin Amendment to the Dodd-Frank financial reform package. When the cloud of uncertainty was lifted, Visa and rival MasterCard (NYSE:MA) both enjoyed monster rallies. That kind of political risk simply doesn’t exist right now. Still, I do expect Visa to outperform the S&P in the years ahead.

On a side note, my Visa recommendation was the winning pick in InvestorPlace’s 10 Stocks for 2011 contest (Read about my follow-up pick for 2012, and check out the rest of the “10 Best Stocks for 2012”).

Unilever (NYSE:UL) has also quietly generated good returns for me. It ended the year up a solid 8%, and its total return since I recommended it in December of 2010 is a not-too shabby 16%. Unilever already gets more than half of its revenues from emerging markets and pays a great dividend. This is one I recommend holding for the remainder of the decade.

Colgate-Palmolive (NYSE:CL) is another stock that has quietly put out decent returns. The stock ended the year up almost 15% and 21% in total returns since I recommended it in November of 2010. This is another company that is far from sexy — it sells soap and toothpaste — but it’s precisely the right kind of stock to own in a choppy, trendless market.

DirecTV (NASDAQ:DTV) has done relatively well. The stock ended the year up 7%, which isn’t bad considering the abuse the markets have taken over the past year. Warren Buffett made a splash when he announced that Berkshire Hathaway (NYSE:BRK.B) had taken a large position in DirecTV, and I continue to like the company as a backdoor way to get access to the rising middle classes of Latin America. Hold on to this one.

Busts

Procter & Gamble (NYSE:PG) was a roller-coaster stock in 2011 that almost ended flat until it squeaked out major gains in late December, making for a yearly return of 3.7%. This isn’t a huge bust, but — if not for managing a respectable 16% total return since I recommended this stock in July of 2010 — I would call PG a disappointment. Like the other dividend-paying consumer products companies, I continue to like P&G and recommend holding it for another quarter or more. It pays a reliable dividend, which matters in a market like this.

Nestle (PINK:NSRGY) has also been a bit of a disappointment after taking a beating due to the Swiss franc’s fluctuations and due to volatility spilling over from the euro zone. Still, Nestle is one of the finest companies in the world, pays a great dividend and has exposure to emerging markets that goes back decades. This is one stock I recommend you hold on to for a while.

Finally, my broad play on the rise of the emerging market consumer — the EGShares Emerging MarketsConsumer ETF (NYSE:ECON) was down 5.7% for 2011, which compares quite favorably to most broad emerging market indices. As a point of reference, the popular iShares MSCI Emerging Markets (ETF) (NYSE:EEM) was down 20.36% for the year. Therefore, I continue to recommend ECON as a core, long-term holding.


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