It might seem that companies in emerging markets in Asia and Latin America have little in common with blue chip giants like Berkshire Hathaway, Exxon Mobil, Johnson & Johnson and Microsoft. But there is one thing that such companies now share: access to cash — lots of cash. In the case of the blue chips, many have large cash reserves that can see them through the recession. And in the case of some emerging market companies, their governments are actually in better fiscal shape than is the US — meaning that they can spend hundreds of billions of dollars to stimulate their domestic economies and improve their infrastructures without the risk of falling into debt. That helps the companies as well.
Here are Goldberg’s mutual fund picks to help you take advantage of the “cash is king” theme…
Vanguard PRIMECAP Core Fund (VPCCX). This large-cap growth stock fund, which was launched in December 2004, is currently Goldberg’s favorite fund because it is packed with very high-quality growth companies such as Google, Berkshire Hathaway and Eli Lilly & Co. All have huge cash hoards and are likely to hold up well even in a prolonged downturn. Three-year annualized return: -9.67% versus -13.4% for the large-cap growth stock fund category average.
T. Rowe Price Emerging Markets Stock Fund (PRMSX). This fund has its largest exposure in Asia and Latin America. Five-year annualized return: 3.4% versus -1.7% for the MSCI EAFE index, a common benchmark for foreign stocks.
