Ted Bauman, editor of The Bauman Letter, noticed an intriguing investment opportunity approximately one month ago. The stock was not favored by Wall Street gurus. In fact, the company was known for having poor managers during the past several years. Even so, the company still managed to maintain some of its intrinsic value as a business. In the middle of December, the company’s board of directors was getting ready to vote on a new leader. Each voter had an agenda that differed from one another. Ted Bauman thought that the shareholders were going to vote for the reformers and that the stock would experience a favorable price increase.
Ted Bauman’s opinion was correct. He purchased the stock and experienced a 13 percent gain in three weeks. In comparison, the S&P 500 index only went up slightly over 2.5 percent during the same month. After viewing the statistics, Mr. Bauman decided to research data regarding similar financial plays during the previous year. He found an ample number of examples. However, most investors did not know anything about the companies or their stocks. He discovered that the average investor could have realized gains that exceeded those realized by the S&P 500 by at least 70 percent. Furthermore, he contends that the same stocks are going to repeat their outstanding performances during 2018.
Emerging Markets Offer Potential Gains for Investors
The stock purchased by Ted Bauman in December of 2018 was the iShares MSCI South Africa ETF (NYSE: EZA). It turned out that the major political party elected a strong reformer for its next president. Accordingly, financial markets reacted favorably to the news. Ted Bauman achieved a small victory within his investment portfolio. Mr. Bauman has been quick to add that the only reason he succeeded was because he paid close attention to the specific emerging market and bought the shares at low prices.
Ted Bauman reminds investors that they should follow his example. He has made a prediction that emerging markets, commonly referred to as Ems, are going to perform extremely well in 2018. Most investors did not know about the potential of Ems during 2017. Everyone wanted to invest in U.S. equities because the S&P 500 was up more than 20 percent. However, EM prices realized incredible gains that far surpassed the S&P 500 index. Investors in Ems realized more than 37 percent gains during 2017.
His contention is that Ems will perform even better in 2018. The reasons for Ted Bauman’s beliefs about the future potential gains related to investing in Ems are as follows:
- The U.S. dollar posted a negative performance during 2017.
- The poor performance helped to boost EM stocks in emerging countries in terms of U.S. dollars.
- In the case of Ems versus U.S. dollars, opposites seem to attract.
Em Valuations and Earnings Growth in 2017
The EM performance in 2017 was mainly based on the fact that the emerging companies witnessed significant earnings growth. According to Ted Bauman’s research, the companies should continue to expand and realize greater profits. Statistics show that EM businesses are likely to experience more than 13 percent earnings growth during 2018.
Investors may worry about investing in EM stocks after their strong performances during 2017. However, EM stocks are currently trading at 25 percent less than the stocks in developed countries. Another thing to consider is that the equity cycles related to Ems typically last for lengthy periods. For instance, EM ETFs realized 29 percent annual returns for each of the years between 2002 and 2007.
Furthermore, most of the performances for Ems in 2017 were caused by a reinvigorated Chinese stock market. Other countries, including South Africa, Brazil and India, are currently expected to participate. In fact, Ted Bauman thinks that Ems are classic value plays for investors.
Now is the Time to Rotate Offshore Stocks
Investors are delighted that U.S. stocks have reached new highs during 2017. However, people who already created investment portfolios prior to 2017 are reaping even greater profits. Ted Bauman thinks that it is unrealistic to predict 20 percent gains for U.S. equities in 2018. The overzealous ascent will eventually slow down and enter a mode of descent. Most analysts foresee 10 to 20 percent growth in U.S. Equities during 2018. In contrast, Ted Bauman thinks that Ems may offer investors returns that are 200 percent higher than returns realized by the S&P 500. According to Ted Bauman, the next bull market is more likely to occur in emerging countries.
Ted Bauman has had close to two decades of experience as a financial consultant, researcher and author. He has written about urban planning for the United Nations and the World Bank. Mr. Bauman was born in Washington, D.C., and moved to South Africa when he was a young man. He attended the University of Cape Town where he majored in economics and history. As a resident of South Africa for 25 years, Mr. Bauman volunteered for a wide array of charitable organizations including the management of housing projects for people with low incomes.
Ted Bauman joined the staff at Banyan Hill Publishing in 2013. He is currently the editor of The Bauman Letter, Alpha Stock Alert and Plan B Club. The three publications emphasize how to protect assets and personal investments. Ted Bauman currently resides in Atlanta, Georgia, with his wife and children.
In an interview published by IdeaMensch on December 15, 2017, Ted Bauman was asked about his previous work experience as a youth. He said that he had worked for McDonald’s, Burger King and a few gas stations. He mentioned that he worked at these companies because he needed the money. However, he added that he never intended to focus on a career at any of these establishments. He said, “I learned that, while those jobs weren’t necessarily the worst, they were certainly not the kinds of jobs I hoped to have the rest of my life.”