Motley Fool Hidden Gems Investing - Global Markets to Watch in 2023

Episode Date: December 27, 2022

Outside the U.S. there are opportunities for investors in the new year. (0:21) Bill Mann discusses: - Countries producing raw materials (and video games) - What needs to change in China to get him more interested in companies like Alibaba and JD.com - Why investors should be watching Canada and Norway Stocks mentioned: JD, BABA, TCEHY Go to www.fool.com/report to get your free copy of our "5 Stocks Under $49" report. Host: Chris Hill Guests: Bill Mann Engineer: Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

This family is on the brink of civil war. On September 18th, Mobland, the hit original series, is back on Paramount+. We are the Hartigans. Don't know them yet? Then Google us. From the underworld of Guy Ritchie. Do you want to step up the ladder?

I want Comet dead. Starring Tom Hardy, Pierce Brosnan, and Helen Mirren. Do I have to do everything myself? You want more? I'll give you more! Mobland, new season hits September 18th on Paramount+. The last week of the 2022 stock market, mercifully, has begun. Motley Fool Money starts now. I'm Chris Hill. Joining me today, Motley Fool Senior Analyst, Bill Mann. We're

almost to the end, Bill. We are. And by today, I think you should be more clear about the fact that today may not actually be today. We are recording this a few days before Christmas, yes, to properly timestamp this, because stuff happens. I wanted to talk with you and get your thoughts on how you are thinking about non-U.S. markets in 2023. For context, a year ago at this time, we weren't anticipating Russia invading Ukraine and all of the ripple effects, both in terms of human toll and in terms of businesses that come from that. So, this is my way of acknowledging that predicting even the near-term future is difficult. But all that said, is there anything in particular that you are expecting from international markets

in 2023? You know, it is really incredible. And this is the time of year in which people prognosticate. And I think they prognosticate because they are asked. Most people probably don't say what you have just said or we have, you know, what we say, which is prognosticating is really hard. And it's a great way to make yourself feel dumb if you go back and check. So, yes, nobody was predicting in 2021, in December, that Russia would actually invade Ukraine and that that would be the story of the year. We at the time were actually still worried about primarily about COVID, I think. You know, we also weren't really predicting that there would be Fed rate hikes that exceeded more than 4 percent, 400 basis points total. So prognosticating is

really, really hard. What we can do is we can look at the situation now and we can say, where do you see opportunity or where do you see the market perhaps not being properly recognized for what it is? Internationally, for me, there really is one great answer. There are certain markets that were massively outperforming in 2023, 2022, I should say. The Turkish market, for example, in U.S. dollars is up almost 90%. The Argentine market is up nearly 25%. The Chilean market is up nearly 19%. Why do you suppose that might be, Chris?

Back to you. Well, in the case of Argentina, I'm sure a little bit of that is just the positive vibe ripple effect of winning the World Cup. But outside of that, I'm going to assume it has something to do with raw materials. Bingo. I left out the other really good performing stock market from 2022 because it would have given it away, and that is the United Arab Emirates was up 25%. An oil and gas dominated economy, also a banking dominated economy. In some ways, I suggest that what we might be looking at in 2023 is a resumption of a steady state where you don't have the risk-free rate moving in some countries from below zero to above 4%, because it's really hard to predict how much a company's

cost of capital is going to be when you don't know what the risk-free rate is going to be. So, there are certain markets where I see there are deep opportunities right now. One area that I think is pretty interesting is actually video gaming, which everybody thought was the greatest thing that was going to get us through the pandemic, and maybe it did, and now people are saying, video games are, you know, they are, from an investing standpoint, they're played. I don't think they are. and some of the biggest and best video gaming companies and opportunities

come from Scandinavia. There are certain Scandinavian markets where you can get a lot of exposure to an area that I still think is going to be a big thing that the market right now doesn't seem to be paying much attention to at all. One of the ways I've seen your investing evolve over the past few years is you seem to have less trust in Chinese companies and therefore you're less interested in owning shares of Chinese companies. And I'm curious if there's anything you can think of that could happen in 2023 that would make the JD.coms and the Alibabas and others of the world more attractive. Now, so you're trying to say something that makes me look really smart because China was one of the worst performing stock markets of 2022. So thank you so much for

that. You weren't really doing that, but I just wanted to, you know, I just wanted to go. It was incidental. Exactly. It was an unintended ripple effect of my observation. I apologize for complimenting you accidentally. China in 2017 really changed what their focus was from a governmental standpoint. They went from being all about growth, however they could get it, to much more of a focus on equity throughout the country. There are parts of China that are stuck in what seems like the 19th century at this point, and there are parts of China that are as developed as any place on Earth. And they have recognized that as being

something that creates instability within the country. So, within that, they have decided that the last party Congress, not the one in 2022, the one from 2017, which was the tip-off, that they would not be looking very favorable on untrammeled consumption by the wealthiest. They would be looking at ways to create economic potential and economic opportunity for the poorer parts of the country. None of that in your mind or in our mind should suggest that foreign passive shareholders' interests were going to be top of mind in China. So, for me, China has become a place where the government is openly hostile to us making a return. And if they're going to be openly hostile, I am going to choose to believe them.

It seems like a, yeah, it probably best to take them at face value. Take them at face value because they do have the power within China. Now, I would say that China has an incredibly thin tightrope that they are walking in terms of a lot of the Chinese provinces are heavily indebted. they have actually generated a lot of their funds from operation, from capital sales and things of this nature. So, there is, in fact, there have been some rumblings that they might be changing their footing somewhat. Until that happens, I don't see any real reason to get super excited about China. Now, the Chinese market has deeply underperformed over the last decade. A lot of

people don't really realize this. They think that China has been this ascendant market for a long time. The reason why you might be interested in China is because a lot of its biggest and best companies are almost otherworldly cheap. I don't know that that's a reason to take a deep interest in China. I would be much more interested in markets where they are not openly hostile to me generating a return. But there is something to be said for a market that has dropped as much as the Chinese one has to focus on some of their best companies. And you mentioned, too, in the form of Alibaba and in JD, Tencent might be another one that I would throw onto that pile. Yeah. I mean, it's definitely not fun for us as investors when we have years like we've

had in 2022. But to the extent that it's a silver lining, I think it offers a nice advantage for us as long-term investors. And there are a lot of companies out there that are back at levels that we haven't seen in a long time. Our colleagues have actually put together a report of five companies that have all fallen below $49 a share. And the report is free. So anyone listening can just go to fool.com slash report and get immediate access to the report, which creatively is called five stocks under $49. So, shout out to whoever came up with that. I'm genuinely a fan of the straightforward headlines. What do you got? What are you selling? Well, it does this and this. No, it is five stocks that are below $49 per share.

Yeah, don't give me a Q&A title. Just give me the straight one. Go to fool.com slash report. I think that's great. One other thing I would say about where we are, as you say, well, 2022 was not that much fun. 2021 was not that much fun. The United States is still the best-performing major stock market over the last decade. And actually, it's not very close. Yeah. It's part of what gives me optimism going into 2023. Absolutely. You should absolutely be optimistic. Let's wrap up with this. Having just talked about China, which is, despite the performance over the past decade, probably the international market that gets the most attention here in the

U.S., what is an under-the-radar international market that you think investors might want to learn more about as we head into the new year? Would you like two? I would love two. Okay. I will give you two, the first of which is Canada. I said an international market. Oh, you're right. OK, I'll give you one and a half seat. Now, it's always me who ends up having to apologize to the Canadians. But I think it's your turn. Oh, yeah. I was playing this straight. It's me. Yeah. The guy from Maine hates Canada. That's all there is to it. Canada is the first one for a couple of reasons. One, obviously, a highly, highly advanced economy, very diverse, a lot of really good intellectual intellectual property coming out of Canada. It is also very resource-rich, and it is a market that we can trust in a way that you wouldn't necessarily trust the Chinese market or a lot of markets overseas. The other is Norway.

And we talked earlier about the dominance of video gaming in the Scandinavian markets. Norway may be the top of the list. But once again, also a market where they have huge mineral and oil reserves. And although you and I are both very excited for the green future, there will be a bridge to get there. And that bridge will include almost every natural resource that Norway has in abundance. Bill Mann, always great talking to you. Thanks so much for being here. Thanks, Chris.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening, we'll see you tomorrow.