Every week a professional investor tells MoneyWeek where they’d put their money. This week, Nitin Bajaj, portfolio manager of Fidelity Asian Values, highlights three favourites
We are living in an uncertain environment, reflected in the high level of volatility across asset classes. But macroeconomic trends are difficult to forecast and building a portfolio of stocks based on such views is even more challenging. At Fidelity, therefore, we remain focused on a fundamentals-driven, bottom-up approach to investing, building a deep understanding of businesses and the price at which they are available.
As a result, my investment process is to own good businesses run by management teams whom we can trust. We buy these stocks only when we see an ample margin of safety. This leads us to take contrarian positions as it is easier to find undervalued businesses in countries and sectors that are out of favour with investors.
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1. Sinotruk (Hong Kong: 3808)
One company we hold is Sinotruk (Hong Kong: 3808), China’s largest heavy-duty diesel-truck manufacturer. It accounts for 26% of the market within China and over 50% of the export market. The company’s strategic partnership with Germany’s leading engine producer, Traton, allows Sinotruk to use German engine technology, helping it maintain margins higher than the sector’s average. Sinotruk’s broad product range and strong distribution network enable it to continue gaining market share.
Our position was initiated when the stock was weak amid Covid lockdowns. The share price appreciated sharply when China abandoned its lockdown policy. Although the recovery in demand was lacklustre, export volumes (mainly from Africa and the Association of Southeast Asian Nations, ASEAN) exceeded expectations, driving earnings growth. Sinotruk has a 30%-40% market share in Africa and a 15% market share in ASEAN thanks to its quality and competitive prices.
The stock should do well whenever domestic demand recovers from current levels. While we wait, we are enjoying higher dividend payouts than in previous years.
2. Interojo (Seoul: 119610)
A contact lens manufacturer worth a look, Interojo (Seoul: 119610) is a Korean manufacturer of contact lenses. Beyond Korea, it sells its lenses mainly in Japan, Europe and the Middle East. It’s a small player in the global contact lens industry but is gaining market share from its less efficient Taiwanese peers, which implies healthy growth prospects over the next three to five years.
It excels in research and development, and its high-quality products that offer value for money also bode well. Meanwhile, Interojo has completed clinical trials of its silicon hydrogel lenses in the US and aims to enter the US market by the end of 2023, providing significant potential for expansion.
3. Genus Power Infrastructures (Mumbai: GPIN)
Genus Power Infrastructures (Mumbai: GPIN) is one of India’s largest energy-meter manufacturers with a capacity of 11 million meters per annum, which it supplies primarily to power distribution companies.
India’s power distribution is in the hands of extremely inefficient state-owned enterprises. However, with transmission and distribution losses on the rise, the government’s focus is on reducing such losses using smart and pre-paid meters. Moreover, to encourage faster adoption, the tendering is being done through a private distribution entity. Around 140 million meters are expected to be installed in the first leg of the project.
This is a major opportunity for Genus in a market that potential rivals would struggle to enter owing to licence and qualification requirements. We initiated the position in 2021 at attractive valuations, anticipating that the company’s revenue and profits could double in the next few years, but we also see this as a ten-year opportunity in the power sector.
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