Merrill Lynch analyst Richard Bernstein is bullish on consumer stocks in emerging markets. One of the prime rules of long-term wealth building, he says in a recent research report, is to be the provider of scarce capital. An investor should prudently invest in opportunities that other people might hesitate to approach, he suggests.
“When it comes to emerging markets, the consensus still focuses on commodities and industrial plays,” Bernstein says. “We have a different view: We’d emphasize consumer-oriented investments in those markets.” He says that consumer products markets in emerging economies are significantly underdeveloped versus those in the more mature economies.
Russia, for one, is quickly laying the foundation for a consumer economy that can produce rock-solid returns, says Patricia Cloherty, chairman and CEO of Delta Russia Fund, which was launched in June 2004 with $120 million in capital. Cloherty, a former deputy administrator of the US Small Business Administration, says Russia is an entrepreneur’s paradise with a nascent consumer economy. In a recent presentation she notes that there is a lot of pent-up consumer demand in Russia. Emerging companies are finding a growing supply of young Russians returning for opportunities at home after receiving degrees in the West, she says.