In particular, Lee says companies with high sales exposure to emerging markets offer value after getting hit relatively hard in the sell-off that has taken its cue in part from EM.
"Stocks with low EM exposure trade at 18.9x [earnings]," writes Lee in a note to clients.
"This is 3.3 turns above those with high EM exposure. This 3.3x premium is well above the 10-year average of 1.6x and suggests that a contrarian stance would argue that high EM exposure may be the better risk/reward today."
Lee suggests the following stocks for those who want to play this theme. They're all in cyclical sectors, their forward P/E ratio is less than 16x, they're all expected to deliver positive 2014 revenue growth, they're all overweight-rated buy JPM analysts, and they're all trading below JPM analysts' price targets:
- NCR Corporation (NCR): 25% sales exposure to emerging markets, +1.3% YTD return
- TTM Technologies (TTMI): 32% exposure, -6.8% YTD
- Tupperware Brands Corporation (TUP): 43% exposure, -18.5% YTD
- Lam Research Corporation (LRCX): 61% exposure, -9.3% YTD
- KLA-Tencor Corporation (KLAC): 52% exposure, -6.5% YTD
- Intel Corporation (INTC): 57% exposure, -8.2% YTD
- ON Semiconductor Corporation (ONNN): 57% exposure, -0.1% YTD
- TAL International Group (TAL): 43% exposure, -25.3% YTD
- Eastman Chemical Company (EMN): 31% exposure, -4.6% YTD
- E. I. du Pont de Nemours and Company (DD): 30% exposure, -5.3% YTD
However, he also provides a word of caution, advising clients to pay attention to developments in the high-yield debt market.
"In particular, if HY markets widen and reach 50 basis points, we would be more mindful of the risk for further downside. The reason is that typically a widening in HY presages either worsening liquidity and/or greater perceived risk-both undermine the case for stocks. We will continue to monitor this metric closely in coming weeks."