5 global stocks for a gloomy market

Stocks worth buying now

Accor: Call this a conventional value play with a developing-world twist. According to a sum-of-the-parts valuation calculated by Deutsche Bank, this international hotel and travel-service company sells at a discount of about 30%. The biggest reason for that discount, according to Deutsche Bank: Investors undervalue the company's potential for growth in the developing world.

The story here isn't Accor's high-end Sofitel brand but in the continued redeployment of capital, through the sale of assets, from the developed markets of Europe and the United States to its midprice and budget chains in Asia. The company's operating profit from its budget hotels outside the U.S. is projected to climb 17% in 2007 and 12% in 2008.

Central European Distribution: I'd call this play a political turnaround. I sold these shares out of Jubak's Picks in 2006 because I thought Poland's xenophobic Law and Justice Party government, in power since 2005, was increasingly alienating the members of the European Union, especially Germany, that Poland needed in order to grow its economy.

But now that government is out, replaced with a Civic Party government that will continue Poland's integration into the European Union. Central European Distribution has benefited from that opening. The company has expanded into countries such as Hungary that are recent members of the union and, more recently, into Russia, where the company's Parliament brand of vodka holds a 1% share. That's enough to make it the company's second-biggest brand by unit sales.

Jacobs Engineering: I'd call this a recycling play -- only Jacobs doesn't recycle aluminum or cardboard but U.S. dollars. The company's biggest growth area is the Middle East, where dollar-rich oil producers are spending to build up their energy infrastructure and to diversify by investing in refineries and chemical plants.

With projects diversified across industries from transportation to petroleum to pharmaceutical to defense, Jacobs isn't vulnerable to a downturn in any one sector. Although on current trend, it looks like the biggest danger at the company is too much business. The company's backlog is likely to expand 15% year over year to $11.3 billion when the company reports Nov. 6, according to KeyBanc Capital Markets.

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Joy Global: This growth stock is undervalued because so much of its best growth is further away than Wall Street likes. The company told analysts last month that its goal was to produce 20% annual compound earnings growth from now through 2012. You'd think that would be enough to make the stock explode out of the blocks, especially because, given the continuing long boom in global mining, it actually looks like Joy Global can deliver. But no. Shares are up 8.8% since that Sept. 20 meeting, but that's been barely enough to give the stock's 50-day moving average a positive slope.

The problem, I'd guess, given Wall Street's notorious short-term focus, is that so much of that earnings growth is expected to show up only after 2008. That's when Joy Global is calling for a recovery in the U.S. coal industry. It should take that long, as well, for the company's China strategy to bear fruit. Joy Global is developing a line of less expensive -- but not less profitable, the company quickly pointed out to analysts -- Joy Lite equipment for second-tier mining companies in that country.

Nokia: Think of this one as a high-tech annuity. The big growth in wireless-phone sales is in the markets of the developing world. Global wireless-phone sales are projected to grow by 12.5% in 2007. That's not bad growth. But in China the market is projected to grow by 14%, on top of 18% growth in 2006. And wireless growth in India makes China look like it's standing still: projected growth of 48% in 2007 on top of 100% growth in 2006.

But these markets demand a cheaper entry-level phone, and most wireless-phone companies can't make an entry-level phone cheaply enough to keep profit margins as high as they are in their slower-growing developed markets. Nokia can.

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In the third quarter, the company reported that because it manufactures so efficiently and manages costs so effectively, it increased sales in developing markets while also raising margins. Operating margins rose to 22.6% in the third quarter from 13.1% a year ago even as average selling prices fell to 82 euros from 92 euros. In the quarter, the company grew sales by 11 million units from the second quarter. That gave Nokia a market share of almost 40%. Nokia's ability to capture so much of first phone market in developing economies creates the possibility of snowballing profits in the future: Nokia stands to gain a disproportionate share of the business as these customers upgrade to more-expensive phones with higher margins.

Now stay tuned to the Federal Reserve on Wednesday. The U.S. central bank will give us a first indication of how much new cash will be available to float global financial markets.

Continued: Updates to Jubak's Picks

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