OTCJ: The Three Hottest Global Stocks

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There are two new BLOGS for your review over the weekend should you choose to give them a quick read. First, there's some commentary on China Energy Recovery (OTC BB: CGYV) as it relates to developments in China and the incoming Secretary of Energy. Second, there's some technical commentary on long silent eFoodSafety (OTC BB: EFSF)- no news out of the company, but the stock has been quietly sneaking up the charts is signaling a possible positive development.

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The Three Hottest Global Stocks

Do you want to make money on the long side in the stock market? You have to expand your thinking. There's four words I believe are very important - you need to understand them if you want to make money in the stock market in 2009- What are the four words? Here you go:

GLO-BAL-IZA-TION- That's right. All four words. To make money today, it's four times more important than one word. Globalization. Think global. The US has much bigger problems many other parts of the world, and in today's new era of investing we have opportunities beyond our own borders. 5 years ago today's ideas were very difficult to trade for individual investors. Today, you can easily go where the money is going.

I hope you know what an ETF is by now. If not, let me give you a quick tutorial. ETF is an acronym for "Exchange Traded Fund". These securities are very similar to the old closed end mutual funds with one major difference- many of them are designed to magnify market moves. For example, if you want to trade the S&P 500, you can easily do so on a 2 for 1 basis on either side of the market. If you believe the market is going to go down, you can simply buy SDS. It will go up twice as much as the S&P 500 goes down. If you want to bet the S&P 500 is going to go up, simply buy SSO. It will go up double the S&P 500.

There are a huge number of ETFs to choose from, and they offer a very simple way to participate in markets that were very difficult for individual investors in the past. If you want to look at the vast array to choose from, is a good resource.

There are three International ETFs looking very strong right now. These ETF are trading well because their economies are far sounder the US economy. I think all three of the ETFs will be substantially higher in 2009. For your consideration:

To start with, here's an ETF I've written about before. Goldman Sachs came out Thursday with a forecast for 6% GDP growth in China for 2009. That's a strong number, albeit much lower than the double digit growth China has enjoyed for 20 years. If the US was looking at 6% GDP growth in 2009, the stock market would be going nuts, the bears would be screaming about inflation, and we'd all be opening Champagne for breakfast. Goldman Sachs believes China will enjoy 9% GDP growth in 2010.

Economists don't like the number because they feel China needs to have 7% plus GDP growth to support the 25 million people who move from the rural areas to the cities each year looking for work. 

To make up the difference, there's a $600 billion stimulus package hitting their economy, and they don't have to borrow the money as we are. The Chinese version of the Federal Reserve can simply write the check. 

I strongly recommend owning FXI for the next year. This is an ETF that owns the 20 largest companies in China. It is heavily weighted to telecom, energy, and financial services. There's a cash dividend of close to 5% at the current level.

As I write this edition, FXI is trading at $29.64. I believe the ideal entry level would be $28. I also believe this ETF could trade into the $60 to $80 range next year as the investing world starts to realize China has not vanished off the face of the earth. 

Over time, the Chinese economy will become less dependent on exporting manufactured goods and evolve to more of a self contained economy dependent on their 1.3 billion consumers. Considering there's only 40 cars for every 1,000 drivers, vs 800 per 1,000 in the US, there's lots of room for growth.

Another Global ETF popping up on the radar screen is South Africa. I'm not sure exactly what's going on down there, but the forecast I could find for 2009 had the country at 1% GDP growth. 

The ETF representing their largest DOW like companies looks technically very strong. It's heavily weighted to Industrial Materials, Telecom, and Financial Services.

Also- here's a really nice benefit to owning this one- at its current price, there's an 8% cash dividend. Technically, it looks just great. The highs are getting higher, and the lows are getting higher. Right now, big money loves South Africa.

South Africa has historically been a mining driven economy. They are evolving into other areas, and expanding. They are still the world's gold miner, so if Gold starts to trade up dramatically, this ETF might become a monster win. 

The third country ETF that looks just great is Brazil. Estimates have GDP growth in Brazil at 4%. Inflation is out of the picture as interest rates are at 13.75%. If the country delivers 4% GDP growth with 13.75% interest rates, that's as gold as goldilocks gets.

This is another chart looking ripe for a breakout. The lows are getting higher, and the highs are getting higher.  This ETF is heavily weighted towards Industrial Materials, Energy, and Financial Services. 

Want to make money in the stock market in 2009? Go global. These countries are not going through the same meltdown we're going through here in the US. Consumers are not over leveraged. They can't get that kind of credit. Their banks are solvent. Their economies are growing.

Here's a summary of today's ideas:

  • Buy China (FXI) at $28 and take your 5% dividend. Price target $50 in 2009
  • Buy South Africa (EZA) at $34 and take you 8% dividend. Price target $52 in 2009
  • Buy Brazil (EWZ) at $35 and take your 4% dividend. Price Target $67 in 2009
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