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Money Manager: Be Selective With Overseas Stocks


Rob Lutts, founder and Chief Investment Officer of Cabot Money Management, told CNBC’s “Squawk on the Street” that there are solid investment opportunities in China, India, Brazil and Russia. “The middle class [in these countries] is just evolving,” Lutts said. “Hundreds of millions of people over the next ten years are going to go from earning $500 a year to $5,000 to $10,000 a year. There are some tremendous opportunities in select areas.”

He said buying the Emerging Market Index, which trades on the New York Stock Exchange, is easiest way for most individual investors to play overseas markets. Some investors may want to buy selected ADRs.

But he warned that emerging markets are “rife with risk.”

“There are some companies that are very highly valued and you need to avoid,” Lutts said. “There are many that are growing very nicely and, if you do your homework and stick with the leaders, you can end up with some nice returns.”

Some money managers have recommended shorting overseas stocks, but Lutts disagreed.

"I think a 10% to 15% correction off the high is a very nice place to enter,” he said. Lutts said strong stocks in promising emerging markets aren’t going to be cheap.

“The emerging market countries are going to sell at higher levels,” he said. “You can’t get a great, fast growing situation at a bargain basement price – it just doesn’t happen. So, I’m not afraid to buy at these levels. Expect continued corrections – they are going to happen periodically, but I think this is where investors need to allocate money going forward.”