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Growth Investing

Posted August 22, 2008

Krista Das on TFN Market Insights Has market and economic growth completely disappeared? Andrew Gordon, an expert in dividend paying stocks explains where to turn.

by Krista Das
Baltimore — (TFN): As the U.S. dollar retreats and gold and oil recover, not only are economic power houses shrinking, such as the EU in Japan, but emerging markets are at risk for growth, too.

To fill us in on growth investing I have invited the editor and chief of Income, Andrew Gordon who is an expert in dividend paying stocks.

Andrew, welcome to the program.

Has market and economic growth completely disappeared?

Andrew Gordon: Well, not completely, but as you said, there’s been a big slow down in big economies like Japan. They’re down .6 percent last quarter. Europe registered a .2 percent slow down last quarter as well.

As we all know, U.S. growth is slowing down. It’s still in the black even though we’re growing about 1.9 percent last quarter. That’s not bad. I expect that to be revised down by the way.

So, the Euro zone has the biggest economy in the world. The U.S. is second biggest so we shouldn’t poo-poo that these economies are slowing down, but it’s not – a slow down hasn’t his the rest of the economies. There’s some places where growth is pretty healthy.

Krista Das: So which countries are showing the best growth right now in terms of say six percent and higher?

Andrew Gordon: Well, six percent and higher in terms of the economic growth, there’s a lot of countries. Let’s take Asia for example. China is growing at about 10.1, 10.2 percent right now. Now that’s not the almost 12 percent they have been growing at, but double digit growth is nothing to sneeze at.

India is growing at 8.8 percent growth. That’s pretty good. Again a little bit down from last year, but very good. Russia is growing at 8.5 percent. So you also have some smaller countries in Asia registering very healthy growth numbers, such as Taiwan, Malaysia, Thailand. They all have registering growth of between six and seven percent.

So Asia is, other than Japan, is still a fairly robust economic growth country. Let’s take Latin America. You have a lot of those countries with healthy economies. Okay; you have Peru and Uruguay. They’re over ten percent, but you also have Argentina at 8.4 percent. You have Brazil with healthy growth numbers.

Eastern Europe or Central Europe, you have the central European countries are between five and nine percent growth rates. So a lot of countries all over the world are still growing at a fairly robust rate.

****View the video here…Andrew Gordon on TFN Market Insights

Krista Das: Now besides the bricks and emerging economies such as Vietnam and Argentina have captured investors’ imaginations, what is making these countries look more attractive right now?

Andrew Gordon: For Vietnam, of course their growth rate is at about 8.4 percent. That’s very impressive. It’s a low cost country. It’s attractive to companies who want to invest there, like Intel. They’re making I think a $300 million investment in Vietnam and they’re so appreciative of the cooperation that they’ve been getting from the Vietnamese government. I think they’re thinking of raising that investment to a billion dollars.

But a country like Vietnam which is just starting out, just getting going, it’s fresh meat to investors. Their stock market is at the baby stages right now. The total capitalization is only three billion. It’s just very, very small in terms of number of companies, market capitalization, but by 2010 it’s going to have $10 billion. So this is a chance for investors to get into this country and to make investments and to grow as the stock market matures and it gets much bigger.

So Vietnam is looking very attractive to investors as is Argentina. Argentina has very robust growth at about 8.4, 8.5 percent. It’s the biggest soybean exporter in the world and prices have dipped recently, but they were at record highs. So that’s a pretty good commodity to have under your belt.

Just this past July their industrial output raised 9.2 percent. That’s very, very good. They’re not showing many signs of slowing down and investors like these economies that haven’t been infested yet by the problems that have weighed on U.S. economic growth in the U.S. market.

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Krista Das: Now there are several countries that have shown increased market growth and economic growth, such as African countries like Angola, but a lot of investors can’t figure out how to actually invest in countries like that. So, how would you suggest investing in countries that are showing this strong growth, but they just don’t have the capabilities yet to be able to invest in?

Andrew Gordon: Sure. Good question, Krista. It’s very, very hard to access these companies in these markets. If you want to do it through investment vehicles listed on the major U.S. markets.

My favorite way of investing in Africa is to invest in South Africa. I mean South Africa is one of the more developed, one of the more impressive economies in the African continent and if you invest in a fairly large company –

For example, let’s take Sasol, the ticker symbol is SSL. It’s South Africa’s oil and gas integrated enterprise. It’s a great company. They’re making investments in several African countries. It’s a great company just on its own to invest in and so this is a way to access other African countries. There are other South African companies you could think of. Another way is to invest in American companies that are participating or have invested in those economies. For example, we mentioned Vietnam before. Intel is a company you could invest in and that’ll give you exposure to Vietnam. Another one would be Dow Chemical. If you’re interested in a country like Libya, an African country, North African country. So, there are some impressive domestic companies that are traded on the U.S. exchange.

A couple come to mind. If you’re thinking of Brazil and why not. Brazil is a great country with all its natural resources and commodity exports. Why not invest in a company like Embraer the jet maker. ERJ is its ticker symbol. Or Petrol Bras, Brazil’s oil and gas enterprise. PBR is its symbol.

So there are ways if you wanted to access the above average growth in Eastern Europe you can go with the I-Shares ETF, which is EWO. So there’s the ETF’s as well. India, for example, you could go with the India Fund, which is IFN. So there are a lot of ways to access these markets. I would suggest that you don’t just ignore those countries because you think that it’s impossible to invest.

Sometimes you would have to do it indirectly rather than directly, but that’s a good way to go in some of these countries because they are a little more volatile than the U.S. market.

Krista Das: Well, Andrew, thanks again for coming on today.

If you would like more information on growth investing check out Andrew’s research service, Income, by clicking on this screen or go directly to Today’s Financial News.com.

Until next time here’s to great profits from Smart Investing.

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