Super-Sizing Your Profit Growth in the Frontier Markets

Video Transcript

Hi, this is Rudy Martin for Uncommon Wisdom Daily.

Economic growth here in the United States is sluggish at best, Europe is mired in another recession, the sovereign-debt crisis shows no signs of easing, and even large emerging markets such as China, India and Brazil are flagging. So, investors looking for growth are searching farther afield — to the so-called frontier markets.

These developing economies in Asia, Latin America and Eastern Europe are benefiting from substantial foreign direct investment from the BRIC countries. And their own domestic consumption is rising too, giving them strong purchasing power and the ability to spend their way to growth.

In Asia, one of my favorite frontier markets is the Philippines. It has strong domestic spending, and income from tourism and outsourcing is surging. Its economy is already outperforming its neighbors, with GDP growth of 6.4% in the last quarter. For those reasons, I’ve told subscribers to my Emerging Market Winners service that the Philippine stock market may represent the best combination of solid growth, economic momentum and opportunity in the region.

Several frontier markets in Latin America are also catching my attention, among them Colombia and Argentina. And the best way to get in on these markets may be through companies that are literally catering to their consumers.

Consider Arcos Dorados, which is traded on the New York Stock Exchange under the ticker symbol ARCO. Translated to “Golden Arches,” it’s the world’s largest McDonald’s franchisee, with 1,840 locations across the region. But while that may seem like a lot, it’s tiny compared to the 14,000 McDonald’s serving 312 million people in the United States. Latin America already has 570 million people, and its population is expanding fast, so there’s huge growth potential there.

In fact, Arcos Dorados expects annual revenue growth of 24% over the next five years, with most of the growth coming from Argentina, Venezuela, Colombia, Chile, Peru, Ecuador and Uruguay.

Meanwhile, Burger King is also expanding into the frontier markets, as it tries to catch up to rivals McDonald’s and Yum! Brands. It recently announced plans to open thousands of new international locations over the next several years. And this November, it will open its first restaurant in Cambodia, at the Phnom Penh International Airport. After four years of private ownership, the company is now trading publicly again, under the ticker symbol BKW.

So if you’re looking for growth, you may have to go beyond your comfort zone, to the frontier markets. But don’t worry, you can gain access to them through companies traded right here in the United States.

I’m Rudy Martin for Uncommon Wisdom Daily. Thanks for watching.

Rudy Martin, editor of Global Trend Trader, is the President at Acamar Global Investments, with 25 years of experience serving institutions and high net-worth individuals.

Rudy started his investment career in 1983, co-managing a $2 billion private investment portfolio for Transamerica. Later, he went on to Wall Street as an equity analyst for Dean Witter and traveled globally, serving major institutional equity investors. In 1995, he joined Fidelity Investments as a Senior Investment Analyst for a series of multibillion-dollar fund portfolios.

During his career, Rudy has received awards for institutional investing and is widely quoted in the financial press and on television about topics related to global investing and emerging markets. For more information on Global Trend Trader click here.