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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week

Emerging Markets

December 11th 2009 MSCI Emerging Markets Index
NYSE Symbol: EEM
Industry: ETF Index for Emerging Markets
Price as of 12/11: $41.35


In the last several weeks a number of sectors have started to perk up including telecom and healthcare. Within telecom, Verizon and AT&T are improving thanks to fat dividend yields. Healthcare has improved due to developments in D.C. indicating that Congress may drop the public option for healthcare reform. A number of other sectors are consolidating big gains for the year like the financials. A number of big banks are raising capital to get from under the TARP funds. Another sector that has moved sideways following a big move is/are the emerging market stocks and funds. This week I'll feature a very popular ETF that tracks the emerging markets with the symbol EEM. ETF stands for Exchange Traded Funds which trade like stocks and track some of the most popular indexes around the world. The fund EEM tracks the MSCI emerging market index which includes the largest most popular foreign stocks like Petrobras, China Mobile, Taiwan Semiconductor, Samsung Electronics, KB Financial (not be be confused with KB Homes), and many others.
The U.S. economy seems to have clawed its way out of the Great Recession. Now the big question is, what will normal economic growth and normal earnings be? Currently, economists are projecting 2-3% GDP growth for the U.S. next year. One thing is certain, no matter what the U.S. grows at, the emerging markets will grow faster. Recent projections for the BRIC countries (Brazil, Russia, India, and China) are projecting 9% growth next year. It's simple, the future growth is overseas. Vanguard has their own Emerging Market ETF by the symbol, VWO.
The ETF industry has become very popular alternative to mutual funds. ETFs have also made it possible for the average investor to invest in commodities like the gold fund, GLD. A lot of money has flowed in the gold, other commodities, and bond funds which tells me that's where you Don't want to be. Unfortunately, the average investor continues to avoid the stock market which is why it continues to perform well. If you don't want to invest overseas there is still plenty of upside within the U.S. markets. The largest ETF out there is the Spiders S&P 500, symbol SPY. The ETF that tracks the Nasdaq is the QQQQ. Other popular ETFs that track small cap stocks through the Russell 2000 Index are the IWN and the Russell 1000 growth index, symbol IWF.
There is plenty of growth left in the U.S., but the future is overseas, particularly Brazil, Asia, and eventually Africa and ETFs are a great way to play these sectors and foreign countries.