Every worthwhile investment starts with a seed of an idea. But how do you turn that seed into a healthy, growing investment?
Perhaps the most-powerful seed in the world right now is the exploding spending power by the rising middle class in up-and-coming nations.
That’s because smaller countries that most people beyond middle school probably can’t easily locate on a map are undergoing major socio-economic transformations.
And as we saw over the past few hundred years in developed nations like the United States, once the growth began, even periods of slow or negative growth couldn’t stop it in its tracks.
Another investing seed also has to do with an even-larger global demographic. We’ll talk more about that in a few moments, and I’ll give you three stocks to help you to plant a virtual profit garden that benefits from both consumer groups.
First, let’s look at the investment-cultivating “instructions” that have already been laid out for us … all we have to do is follow them!
Just as any seed needs soil, water and sunlight to grow, good wealth-generating opportunities can flourish if three major elements are present:
- Economic Freedom where a business and its customers can buy and sell what they want, and do business where they choose.
- Ease of Doing Business without countless regulations and endless forms and filing regulations. Some nations make it incredibly difficult to start a new business, and this stifles the flow of commerce. Meanwhile, there are many countries out there that may surprise you with their favorable business environment.
- Absence from Corruption that rewards “what you know” over “who you know.” Unfortunately, bribes exist in many levels of government and commerce in many countries. But there are plenty of nations that strive to rise above it that encourage and promote honest entrepreneurship.
Fortunately, there is plenty of research out there that measures just how well these countries are doing at their stated goals, and two metrics that I’ll describe below can help global-minded investors to determine whether these important elements are present.
‘Land of the Free’ Less-Free
Than Asia-Pacific Region
If you’re like most global-focused investors, you probably don’t zero in on a country and decide that’s where you want to buy your next stock. However, it does make sense to learn about the geographical regions that are thriving, and then determine which sectors within them are healthy and can provide an environment for further (and faster) growth than they’ve achieved to date.
Luckily, there are two great resources to help you in your quest for the best places to invest.
- The Heritage Foundation measures and makes available rankings of economic freedom while the World Bank annually publishes “Ease of Doing Business” rankings.
- Similarly, an organization called Transparency International scores various countries for their respective degrees of corruption and ranks them according to their absence of that corrosive element.
Combining data from the latest tabulations of the above organizations, there are 161 of the world’s countries with rankings for each of the desirable attributes of economic freedom, ease of doing business and freedom from corruption.
Here are the ones to pay very close attention to …
World’s 25 Most Business-Friendly Nations
(1) Heritage Foundation Index of Economic Freedom Index Rank
(2) World Bank Ease of Doing Business Index Rank
(3) Transparency International’s Corruption Index Rank
* Contains ties in rankings
The Asia-Pacific region offers some of the most-welcoming places on the planet for serious business endeavors. Four of the top five spots are held by countries in that area, including the four best rankings in economic freedom.
Japan and Taiwan also appear on the top 25 roster. However, there are some areas of Asia to stay away from right now.
A disappointing 45th-place ranking in freedom from corruption helped nullify South Korea’s eighth-highest Ease of Doing Business score. This dropped that nation one spot out of the top 25 list.
Large counties and their positions of the 161 nations measured include:
*Position of average score in array of 161 nations
How Does This Compare
To the Americas, Europe?
Placing a disappointing eighth—one notch behind Canada—is the United States. The only other representative from the Americas is 17th-place Chile, which finished seventh-best in the world in economic freedom and three positions above the U.S. in that crucial measure.
Before you think about writing off Europe as a socialist, debt-burdened lost cause, note that it had a surprisingly strong showing. That’s because 13 of the 25 countries on the list count that continent as home. (This includes Iceland, a candidate for European Union membership.)
The region’s socialist bent is reflected in Ease of Doing Business rankings below the U.S.’ fourth-place position. Except for Denmark, no European nation bested the United States’ 10th-place position in economic freedom.
Ranked a commendable ninth in Ease of Doing Business but a far-less-respectable 51st in the corruption sequence, Georgia provides a representative from Eurasia. With more-consistent ranking scores of 28, 26 and 27 on the three scales, the Middle East’s United Arab Emirates made the list.
The ‘Just Missed’ List
Returning to the Americas, Venezuela ranked last on the list at 161. But there are many more countries that weren’t included.
For example, closed-economy dictatorships such as Cuba and North Korea did not make an appearance because they didn’t receive ratings in the three categories.
The history of business has been that when conditions are ripe, enterprising individuals will always step in and capitalize on the situation, leading to profits for themselves and those who invested in their endeavors.
By that thinking, the countries at the top of the list must contain promising investment possibilities.
3 Top Stocks to Watch in 3 Investor-Friendly Nations
Here are three from the most top business-friendly nations that are worth watching:
Singapore-domiciled Avago Technologies Ltd. (AVGO) produces a huge array of analog semiconductor devices that go into cell phones, consumer appliances, and data networking and telecom equipment.
On the commercial side, Avago provides enterprise storage and servers, renewable energy and smart power grid applications, factory automation, displays, optical mice and printers.
Recently changing hands at 17.3 times earnings, analysts expect Avago to achieve annualized earnings-per-share growth of 12.5% over the next five years. It’s currently trading at $38.48 … and climbing.
New Zealand calls home to a number of Pink-Sheet stocks available to U.S. investors, but none are listed on any of the major U.S. exchanges.
However, there is an ETF that trades on the NYSEArca exchange … and it’s an intriguing investment play on this business-accommodating nation.
The iShares MSCI New Zealand Capped ETF (ENZL) is a $160 million fund that produced a total return of 23.7% over the 12 months ended June 30.
The fund seeks to replicate the investment results of the MSCI New Zealand IMI 25/50 Index and has recently been rewarding holders with a 4.4% dividend yield.
At $36.36, this ETF is trading just a few dollars short of its 52-week high. If it breaks through that important level, it could be full-steam-ahead from there.
Denmark-based pharmaceutical firm Novo Nordisk (NVO) markets its wide array of drugs across the world. Because of aging populations in many of the earth’s developing and emerging nations, demand for drugs will balloon.
While the emerging middle class is an extraordinarily powerful trend to follow and to invest in, keep in mind that there is an even-larger demographic that is entering the “Golden Years” that come with a desire to look and feel younger.
That’s why, in my Global Trend Trader service, I recently recommended taking a stake in this growing industry in another major drug stock, one trading for less than NVO’s current $158.48-per-share price. They’re both solid stocks, but for slightly different reasons.
Here’s why NVO remains near the top of my watchlist …
As for NVO, Standard & Poor’s Ratings Services recently said it anticipates that there is a good chance the firm will become one of the world’s top 10 pharma companies within five years.
Novo Nordisk appears to have sustainable volume growth thanks to an increasing number of global diabetes patients, and the company’s promising new diabetes treatment innovations.
S&P expects Novo Nordisk’s revenues to continue to rise by a compound growth rate in the low-teens and exceed the US$20 billion mark in about five years, supported by its robust portfolio of seven blockbuster drugs that S&P expects to generate an average of at least US$1.5 billion in annual sales.
Companies that call the business-friendly countries home enjoy the luxury of focusing virtually their total energy on growth, with minimal distraction from the burdens of political impediments, crushing regulatory requirements and layers of corruption.
That is why a nation’s degree of business and economic freedom should be a factor in all of your investment decisions. Friendly conditions often lead to some very happy returns!