Try these stocks for emerging market exposure with less downside

Updated: 
Unilever sign

There is no doubt that emerging markets such as China and India hold considerable potential to richly reward long term investors with exposure to these fast growing economies. There is also no doubt that these markets are also incredibly volatile. So what should more risk-averse investors do?

In good shape

One credible option is to buy consumer good companies with considerable emerging market revenue , but which have the added bonus of relatively stable sales, thanks to selling daily necessities people always buy. This is where PZ Cussons (LSE: PZC) shines, with roughly 40% of revenue coming from Africa and a further 20% from Asian countries such as Indonesia and Thailand.

There is no avoiding the fact that Cussons has been suffering recently from a lack of liquidity in the now free-floating Nigerian Naira and the devastating effect of low oil prices on that country. However, the company's business plan of selling staple goods in a wide range of countries paid off over the past fiscal year, as total revenue stayed flat even as the company took a major hit from the steep devaluation of the Naira in its largest market.

Cussons' finances are also in good shape, as a cautious approach to leverage left it with net debt a mere 1.2 times EBITDA at the end of May. That gives the company significant room to maneuver when it comes to acquisitions, a method of growth that has paid off in recent years.

With long term potential for growth in fast growing emerging economies, stable revenue from selling high margin personal care goods and steadily rising dividends, PZ Cussons could be a relatively safe route to emerging market exposure for cautious investors.

Juicy returns

Consumer goods giant Unilever (LSE: ULVR) is also surprisingly weighted towards growth markets, with a full 56% of Q3 revenue coming from emerging economies. And despite the financial press fixating on volatility in markets from Brazil to South Africa, Unilever was still able to increase emerging markets sales by 7.2% year-on-year in the first three quarters of this year.

Growing reliance on emerging markets is just one prong of Unilever's plan to juice-up investor returns in the coming years. The other is an increasing focus on margin improvement. The company is going about this by both cutting operating costs and shifting focus from food products to more profitable personal care goods such as shampoo and soap.

This plan is paying off so far, and half year core operating margins improved from 14.5% to 15% year-on-year. Unilever's shares may be pricey at 21 times forward earnings, but if the company can continue to wring efficiencies out of its existing businesses, while simultaneously growing the top line through exposure to emerging markets, then they certainly have the potential to continue their long run of growth.

If the combination of steady recession-proof sales, wide geographic diversification and high pricing power attracts you to Unilever, I suggest checking out the Motley Fool's latest free report, Five Shares To Retire On, for more investing ideas.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK owns shares of PZ Cussons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.