Investors who think that developed markets can deliver strong returns if China’s economy collapses will be painfully off the mark. Fortunately, we don’t foresee a complete meltdown for China. The world’s quintessential emerging economy also includes pockets of opportunity for investors with a longer time horizon and the stomach for near-term volatility.
Although we prefer to pick individual stocks, closed-end equity funds offer one-stop exposure to specific sectors or security classes. Investors should focus on names helmed by high-quality management teams that have delivered superior returns in up and down markets.
After last year’s rally, European equities trade at elevated valuations; a strengthening EU economy and meaningful earnings growth will be the key to further appreciation. We take profits on a number of names we highlighted last fall and highlight our top three European stocks for the coming year.
With ample exposure to the booming auto industry in the Wealth Builders Portfolio, we book a gain of almost 47 percent in BorgWarner (NYSE: BWA), a leading manufacturer of turbochargers. We also highlight our favorite sectors for the coming months.
Although a company’s growth prospects and earnings will win out over the long haul, how quarterly results stack up to the market’s expectations will drive stock prices in the near term. The key is distinguishing a company’s temporary hiccups from a bigger malaise.
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