CHICAGO, Aug. 31, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: YUM! Brands, Inc. (NYSE: YUM), Caterpillar Inc. (NYSE: CAT), PriceSmart, Inc. (Nasdaq: PSMT) and Las Vegas Sands Corp. (NYSE: LVS).
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How to Profit from Emerging Market Growth
One way to mitigate the first two risks is to invest in U.S.-based companies with significant operations in the emerging markets. These companies must conform to U.S. Generally Accepted Accounting Principles and often have much more reputable histories.
I find it much easier to trust a blue chip's sales numbers in China, for instance, than to trust the sales numbers of a small cap Chinese reverse-merger company who has changed auditors twice in the last 6 months.
Moreover, managers of U.S. companies tend to act more in the interests of shareholders than their foreign counterparts, although that's not always the case. But overall, agency problems (conflicts of interest between shareholders and management) are much less of a problem in the U.S. than they are overseas.
4 U.S. Companies Capitalizing on Emerging Market Growth
YUM! Brands, Inc. (NYSE: YUM)
YUM! Brands portfolio of restaurants include the popular Taco Bell, KFC and Pizza Hut chains. While growth has been muted here in the U.S., the company's China division is soaring as the country continues to shift from an export-based economy to a domestic consumption economy.
Remarkably, China is the company's largest market now, comprising 42% of total revenue. In the second quarter, sales in China surged 33% year-over-year as same-store jumped an incredible 17%. The Chinese apparently love Colonel Sander's chicken, and Yum! has no plans of slowing expansion there.
Caterpillar Inc. (NYSE: CAT)
Caterpillar Inc. manufactures construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Although it is headquartered in Peoria, Illinois, approximately 64% of sales come from outside of North America.
Caterpillar continues to benefit from increased demand around the globe as emerging markets use Cat's big yellow machines to build much-needed infrastructure. Year-to-date, sales have surged 39% in Asia/Pacific, 56% in Latin America, 60% in Europe, Africa and the Middle East.
PriceSmart, Inc. (Nasdaq: PSMT)
Dubbed the "Costco of the Caribbean", this San Diego-based retailer operates 29 U.S.-style membership warehouse clubs in Latin America and the Caribbean. It recently opened its first store in Colombia, and one analyst sees 20-30 stores there in the future, which would effectively double its store total.
If you wonder whether or not this business model works outside of the U.S., take a look at PriceSmart's same-store sales growth over the last few months:
July: 20.9%
June: 19.7%
May: 19.0%
April: 21.5%%
March: 16.7%
February: 18.5%
January: 17.1%
Las Vegas Sands Corp. (NYSE: LVS)
Las Vegas Sands owns and operates The Venetian Resort and The Palazzo Resort on the Las Vegas strip. It was building a high-rise residential condo tower between the two, but the devastating collapse of residential real estate in Vegas forced the company to halt construction.
Instead of expanding in the U.S., Las Vegas Sands is focusing on Asia. The company operates The Venetian Macao Resort, Sands Macao, and the Four Seasons Hotel Macao in China, as well as the Marina Bay Sands in Singapore. In the first 6 months of 2011, 83% of revenue came from these properties, with revenue up 66% year-over-year.
The Bottom Line
With economic growth at stall speed here in the U.S., investors should look to the booming economies of the emerging markets. To help mitigate risks, consider these 4 U.S.-based companies capitalizing on the growth of these countries.
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