A Stock Selecting Tip Right From The Headlines

Here's an easy stock selecting tip staring at investors right from the headlines. Identify a company that manufactures a real product, preferably an expensive one, and then turns around and sells that same product to customers eager and loaded to buy it. I agree, but in the current economic environment, these things are easier said than done.

But hear me out. Let's first locate where the big spenders are. These days, they are gaining in numbers in the emerging markets, such as Russia, Brazil, China and India. And what are these people, who are now slowly but surely joining the ranks of middle class, buying? Well — to sum it up in one word — everything!

Emerging markets are no longer thirsting only for oil, electricity, coal and precious metals. These days, Russian, Chinese, Brazilian and Indian nationals — who we not so long ago believed to be working for and living on a few measly dollars a week — are now buying cars, real estate, jewelry, etc.

The subprime mortgage disaster and the resulting global economic slowdown have certainly brought many dark clouds over many market segments and strategies, including the markets in luxury goods. But most of the valuations have been focusing on consumers in the developed regions of the world.

For some strange reason, industry analysts and economists seem to have purposely ignored consumers in the developing world, the same ones who have enjoyed high GDP growth rates, increasing personal income and more money available for personal spending during the past few years.

The view of the equity markets where luxury products are concerned has been gloomy, no doubt about it. But manufacturers of those same luxury products, say diamonds, believe that the analyses were too broad. Harry Winston Diamond Corporation (HWD/NYSE), for example, has more than doubled its sales of diamonds to Russia, the Far East, Brazil and India. By the same token, the company's North American market has shrunk to about one-third of its total customer base.

It seems that global buying powers have shifted to those benefiting from high commodity prices and enjoying rapid economic expansion. One way for our readers to profit from this development is not to move to China, of course, but rather to buy stakes in companies that have managed to tap in to these emerging markets.

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By: Maximilian Sparrowson

A Stock Selecting Tip Right from the Headlines
— by Inya Ivkovic, MA
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