Published:
October 8, 2007
The
correct answer is
(C.) Eastern Europe
Similar to the post-World War II
Marshall Plan, which sent more than
$105 billion from the U.S. to Europe
for economic growth and
reconstruction, the European Union's
"Marshall Plan 2" is pouring
billions of dollars worth of aid
into Eastern Europe, most of which
was economically stagnant under the
rule of the Soviet Union.
Today, these formerly communist
states are no longer centrally
planned dinosaurs; most are now
members of the European Union (EU).
And all of these new EU states are
expected to join the euro currency
bloc eventually. To adopt the euro,
these countries must meet stringent
fiscal criteria covering factors
such as government spending,
inflation, and accounting standards.
Thus, already developed EU nations
are not only offering aid, but also
building developed financial and
political standards.
So while the aid is a boon to these
developing nations, it's not the
only reason to be interested in
Eastern Europe. The region is
growing at rates similar to most
other emerging markets, yet due to
the adoption of EU law and fiscal
discipline, these nations offer
currency and political stability of
the sort typically found only in
developed nations. Relatively low
wages, growing markets, favorable
tax regimes, and an educated
population are just a few additional
reasons for the region to see strong
growth in coming years.
With these points in mind, emerging
European economies look like a solid
long-term bet for investors. In
fact, stock markets in Eastern
Europe are already seeing strong
gains. The major indices in the
region have handily outpaced returns
from the S&P 500 and other developed
market indices over the past 1, 3,
and 5-year periods.
There are three basic ways to buy
into this growth story -- purchasing
American Depository Receipts (ADRs),
buying U.S. firms with heavy exposure to
the region, or buying a closed-end
fund or exchange-traded fund (ETF)
that invests in the region.
Unfortunately, there are only a
handful of Eastern European ADRs
traded on the U.S. exchanges. In
addition, there are only a few
U.S.-based companies that have heavy
exposure to the region. Buying a
fund that invests in the region is
far easier, but choosing the right
one can be a time-consuming and
daunting task.
As you can see, finding the right
investment in the Eastern European
market can be difficult.
Fortunately, StreetAuthority's Paul
Tracy, editor of the
StreetAuthority Market Advisor
has done the work for you. The
latest issue of his
Market Advisor newsletter
offers an in-depth look at Eastern
Europe and provides detailed
profiles of three promising plays in
the region. This includes
a monopolistic firm in Poland
(trading on the Nasdaq) that has
returned +27% annually for investors
over the past five years. Best of
all, this firm is looking to flex
its muscle by expanding its business
to the rest of emerging Europe --
meaning investors should see solid
gains for years to come. To learn
more about the
StreetAuthority Market Advisor
newsletter, and to read in-depth
profiles of the three securities
positioned to gain from Eastern
Europe's growth, please
visit this link.
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