But emerging markets have been underperforming lately. And at 285p, Ashmore’s stock price is down about 37% over the past year.

Several emerging market stocks are down

However, Ashmore isn’t the only stock in the sector that’s down on its luck. Two such beasts reside in my own portfolio. I’m holding Fundsmith Emerging Equities Trust (LSE: FEET), which at 1,305p is down around 16% compared to one year ago. And I’ve got shares in Vinacapital Vietnam Opportunity Fund, which at 499p is about 9% lower in 2022 so far. But in fairness, it’s up by around 14% over the past year.

Ashmore’s chief executive Mark Coombs said in a trading statement this week that the firm’s recent operational underperformance arose because of challenging conditions. He pointed to things such as “persistent global inflation expectations, new Covid-19 variants and weaker growth in China”. 

But looking ahead, Coombs is optimistic about a recovery in emerging markets — and it could be soon. He thinks the global macro-economic environment looks set to improve and that could help emerging markets to thrive.

For example, he sees firmer commodity prices as a positive. And he thinks valuations already accommodate higher base interest rates. However, he feels emerging market equity and income valuations don’t account for much of the positive outlook. If he’s right, there could be an interesting value situation now with emerging market stocks and investments.

The case for investing

But why should I bother targeting investments in emerging markets? To answer that, I’m going to repeat what FEET’s chairman Martin Bralsford said in the company’s half-year report last August.

He reckons the case for investing in emerging markets “has not diminished”. There’s a growing consumer class in emerging economies. And they are being served by businesses with “strong local brands, innovative business models and some high-quality management teams“. Bralsford thinks emerging markets are catching up with the developed world and therefore continue to present good opportunities for investors.

I reckon there’s potentially good value to be had with these three stock opportunities right now. Ashmore’s forward-looking earnings multiple for the trading year to June 2023 is just below 13. And the anticipated dividend yield is around 6%. Meanwhile, FEET is trading on a price-to-earnings (P/E) ratio just below six with the price-to-tangible-book value around 0.87. And VOF’s P/E is close to just two with a price-to-tangible-book value of about 0.8.

Of course, a low-looking valuation doesn’t guarantee a decent long-term investment performance for me. And emerging markets could continue to struggle causing my investments to fall further.

But I’m optimistic that the pandemic will fade during 2022 and emerging economies will continue to recover. And I’d prefer to buy investments like these when they look cheap rather than when emerging markets are booming and the stocks look expensive.

The post Is it time to return to emerging markets with stock investments like these? appeared first on The Motley Fool UK.

With a performance track record like that, there’s no doubt Smith is a top investor and some people have recently compared him to Warren Buffett. In fact, he could even be a better investor than Buffett, according to a recent article in The Guardian. So the question is, where is Smith investing his own money in the current environment?

Fundsmith Emerging Equities trust 

Interestingly, records show that Smith has been recently investing in one of his own funds – the Fundsmith Emerging Equities trust (LSE: FEET), which is listed on the London Stock Exchange. In late October, Smith purchased 50,000 shares in this trust at a price of £10.80 per share, taking the total value of his investment in the fund to over £6m.

Taking a closer look at this trust, its objective is to invest in companies which have the majority of their operations in, or revenue derived from, the world’s developing countries and which provide direct exposure to the rise of the consumer classes in those countries. Its goal is to invest in companies that generate profits from a large number of repeat transactions, and not to overpay for these kinds of companies.

Considering the selloff across the world’s emerging markets this year, and the recent dip in the share price of this trust (it’s down around 12% over the last three months), I think this could be a shrewd move by Smith.

Long-term growth story

Given that the world’s developing countries are, in general, growing at a much faster rate than the world’s developed nations, this investment in FEET could turn out to be a good move for Smith in the long run. This year hasn’t been a good one for emerging market investments so far, because of uncertainty over trade wars, concerns over rising interest rates in the US, and a stronger US dollar.

However, from a long-term investment perspective, there remains plenty to be excited about. For example, emerging markets now make up around 60% of the world’s Gross Domestic Product (GDP) and they’re home to over 80% of the world’s population. And the Fundsmith Emerging Equities trust, which has significant exposure to fast-growing Asian countries (72% of the portfolio is invested in Asia), plus large sector weightings to the consumer staples and the healthcare sectors, looks well-placed to capitalise on the long-term growth story.

Of course, emerging markets investments can be highly volatile, so they’re higher risk. And while Smith’s investment of £540,000 in his own fund may seem like a lot of money to many people, it’s worth noting that he’s worth somewhere around £250m, so this is only a small investment for him. Yet from a contrarian perspective, this looks to be an interesting investment, in my view.

The post Want to invest like Terry Smith? Here’s what he’s buying appeared first on The Motley Fool UK.