Beyond Silicon Valley

10 Best Growth Stocks To Buy Right Now

High-quality technology stocks are often associated with Silicon Valley, but stellar tech plays can be found in most emerging market countries as well.

In a year when the emerging markets went from hot to not in the blink of an eye thanks to improved growth in the developed world, emerging market tech stocks defied the trend and broadly outperformed in 2013.

Growing labor costs in much of the developing world have contributed to the rise of the emerging market technology sector. Just as manufacturers in the US turned to automation to control labor costs back in the 1990s and 2000s, the same trend is emerging in China and many other developing markets.

Myriad technologies ranging from computer programming, hardware development and even web-based controls are required to support that shift, giving rise to new tech companies the world over.

While the rise of the Internet hasn’t been nearly as disruptive to the young economies of the East as it was to the old economies of the West, it has also spurred a wave of innovation.

North America has the greatest Internet penetration rate at 78.6 percent, but Asia is now by far home to the most Internet users. The former is home to an estimated 273.8 million users, but there are nearly 1.1 billion Internet users within the latter, despite a penetration rate of only 27.5 percent. That means there’s still plenty of room to grow in Asia.

The statistics for mobile devices and smart phones look much the same, making emerging market tech companies some of the most attractive in the world.

Tencent Holdings (Hong Kong: 0700, OTC: TCEHY) is an excellent case in point.

Founded in 1998 as an Internet service portal, Tencent has grown to become one of China’s largest and most used, offering in! stant messaging services, value-added services, wireless Internet (i.e. smart phones), ecommerce and Internet advertising.

While the company’s traditional Internet offerings continue to drive profitability, its wireless valued-added services have proven a huge boon as China breaks all records in smart phone penetration. Mobile users totaled 330 million last year, a huge 150 percent year-over-year increase.

Largely thanks to Tencent’s exposure to that trend, revenues have shown three-year average growth of more than 52 percent, while earnings per share (EPS) have risen by 34.8 percent. That’s allowed to company to make record setting investments in technology development, recently launching an innovative new open platform for mobile development to attract application developers. The company also purchased a logistics firm to support its online shopping business.

Thanks to those and other strategic moves, while the Hang Seng Index returned just 2.8 percent last year, Tencent shares shot up by nearly 100 percent over the course of 2013.

Baidu (NSDQ: BIDU), China’s answer to Google (NSDQ: GOOG), experienced a similar outperformance. As the leading search provider in China, the company is winning a greater share of online advertising budgets across Asia. In the trailing year alone revenues have grown by nearly 63 percent on a year-over-year basis while EPS has been growing by an average of 10 percent, as the company continues to invest heavily in research and development.

While the technology gains in countries other than China haven’t been quite as exaggerated, shares of Indian IT consultancy Infosys (NYSE: INFY) gained 35 percent last year and Wipro (NYSE: WIT) was up 43 percent.

Also based in India, Wipro develops both hardware and software infrastructure to support users in the public and private sectors.

Technology has become a much more global game than it was just a decade ago and, with most of the real growth to be found o! utside of! the US, tech investors must cast a much wider net than they have in years past. That should be well worth the effort this year.

The Consumer Electronics Association (CEA) estimates that global spending on technology will fall by 1 percent this year to $1.06 trillion. That’s largely due to declining smart phone and tablet prices, since the CEA sees no change in overall consumer demand. Consequently, some of the best technology bets will be those focused on underpenetrated parts of the world where what is lost in price will likely be made up in sheer volume thanks to the size of the markets.