Goldman Sachs is approaching earnings season in an aggressive fashion – they’re going for the high beta of high beta names: high growth in the BRIC countries. Goldman recently issued a report recommending that investors overweight a basket of 50 companies in the Russell 1,000 with the highest sales exposure to the BRIC countries heading into this upcoming earnings season. Goldman said:
We favor exposure to Brazil, Russia, India and China (BRICs) over developed markets given the significantly higher GDP growth outlook. We believe investors should use this basket to identify stocks with high exposure to emerging market growth. Long/short investors should consider buying this basket against the S&P 500 to gain exposure to higher growth in the BRICs countries versus slower growth in developed regions.
The performance during the last year speaks for itself. YTD the portfolio us up 43% vs just 17% for the S&P 500. A portfolio of BRIC revenue names outperformed the S&P 500 by 20% over the last 52 weeks. Since inception the portfolio is up 27.7% vs. +7.7% for S&P 500. Clearly, Goldman is onto something with the now infamously coined BRIC trade.
Goldman currently expects these companies to grow 2010 revenues by 9% and earnings by 14%. The names below are Goldman’s favorites. Presumably, the higher the BRIC based revenue the more suitable the name:
Of course, investors looking to outsmart Goldman at their own game might avoid picking individual stocks altogether. The SPDR BRIC ETF has an expense ratio of just 0.4%, a yield of 3% and has outperformed the S&P 500 by 50% over the last year. Beat Goldman at the BRIC game they invented. Consider buying the index fund instead:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.