Every week, a professional investor tells MoneyWeek where he'd put his money now. This week: Simon Edwards, managing director, Midas Capital
With today's backdrop of economic and stockmarket turmoil, the advantages of looking across a broad range of asset classes to find suitable investments are becoming more obvious.
Economic pressures in the US and UK are likely to worsen over the coming months, hobbling growth there and in Europe. While we don't think there will be a full-blown American recession, the risk remains. Much now depends on the health of the US stockmarket, which in turn rests heavily on a banking system that does not appear to be out of the woods just yet.
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We expect stronger growth from Asia than elsewhere, but are not convinced by the decoupling argument. Should America topple over, it will be harder to stand up in Shanghai.
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Three investments we like at the moment are Meggitt (MGGT), a utility for the aerospace industry, Ashmore Global Opportunities (AGOL), a global emerging-market special-situations investment trust, and China Real Estate Opportunities (CREO), a property investment and development company focused on the Chinese market.
Meggitt is a UK international specialist aerospace and defence engineering group that has undergone a significant transformation over the last three years. Management has implemented a strategy of exiting low-margin engineering businesses (with low barriers to entry) and replacing them with higher-margin aerospace specialist-engineering divisions.
Over the last couple of years, Meggitt has established itself as one the world leaders in advanced aircraft wheel and braking systems, a dominant position that has been achieved through two key acquisitions: Dunlop Braking Systems in the UK and K&F Industries in the US. The firm also enjoys a consistent record of strong financial performance and the considerable growth in new aircraft delivery worldwide will provide a strong foundation for Meggitt's business model over the medium to long term.
Ashmore Global Opportunities Fund is managed by London-listed Ashmore Group, a leading emerging-market investment specialist. The fund offers access to Ashmore's highly-successful emerging-market fund range, with investment themes covering dollar debt, local currencies, equities, corporate high-yield debt and special situations.
No other London-listed fund provides exposure to both emerging-market special situations and debt. The fund is likely to benefit from supportive macro-economic tail winds and the emerging-market currency appreciation that we anticipate.
Given our more favourable expectations for overseas property, compared with those at home in the UK, one of our plays on the overseas market is the China Real Estate Opportunities investment trust. We bought into it at the end of July last year because it invests in overseas properties and should catch the growth story in the Far East. It acquires commercial-property assets for income in high-growth cities, such as Shanghai, Beijing and Qingdao, and already boasts seven such properties in its portfolio.
What makes the fund stand out from most of its competitors is its focus on commercial property representing more than 75% of the existing portfolio. The company should be well placed to capitalise on rental growth in the Chinese retail and office sectors. Lastly, it has weathered the recent market turmoil well.
The investments Simon Edwards likes
Stock, 12mth high, 12mth low, Now
Meggitt, 347.25p, 252.5p, 275.5p
Ashmore Global Opps, £10.30, £9.60, £9.90
China Real Estate Opps, 832p, 694.5p, 825p
