The V-shaped recovery in Asian equity markets suggests that the region has fared relatively well compared with others. That may ring true given the lower infection rates, fewer deaths and less economic damage incurred by North Asian economies such as Taiwan, Korea and China, but the experience of these countries is not comparable to those of Southeast Asia and India, which have had less success in containing the virus.
We think the best approach is to invest in companies that are worth more than the market believes. We are looking for new stocks trading at significant discounts to our estimate of fair value, with deep discounts currently available in more cyclical areas of the market, where there is less confidence in the pace of recovery.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A finger in every pie
Larsen & Toubro (Mumbai: LT) is an Indian conglomerate with a market-leading engineering and construction (E&C) division. The company has diversified over time, with other businesses in IT services, financial services, property development and equity investment in infrastructure projects. We believe the group has a strong management team and is well positioned to gain market share as construction activity improves after several years of underinvestment in India. Our analysis suggests that Larsen’s core E&C business is being valued below the level it reached during the global financial crisis.
Cashing in on cars
Astra International (Jakarta: ASII) has interests in a wide range of market-leading vehicle-related businesses in Indonesia, including four-wheeler manufacturing for Toyota; two-wheeler manufacturing for Honda; car dealerships and vehicle financing. Astra also own a stake in Indonesia’s largest dealer of Komatsu heavy equipment, United Tractors. The shares have derated significantly given uncertain demand due to Covid-19, having been struggling with slower growth in recent years. While the fundamentals of the Indonesian economy are weak in the short term, we believe that demand for vehicles should eventually grow as GDP per capita rises. Astra should also benefit from new Toyota model launches that are expected in 2021.
Yue Yuen Industrial (Hong Kong: 551) is the world’s largest sports shoe manufacturer, serving global brands such as Nike, Adidas and Asics. Lockdowns and store closures saw a sharp decline in sales. By early next year sales should be getting back to normal. The share price, still around 50% below where it was in January, reflects little hope of recovery. The company has relocated manufacturing capacity outside China and invested in automation and a new enterprise resource planning system to enable it to manage shorter lead times from customers better, which should aid its eventual earnings recovery. The shares are on a single digit price/earnings ratio based on our estimate of normalised earnings – a significant discount to fair value.
-
Rail fares could spike by 5.8% next year – how to save on train travelJuly’s RPI inflation reading tends to determine rail fare hikes in the following year. We look at how much your train tickets could cost, and how to save money
-
'Governments are launching an assault on the independence of central banks'Opinion Say goodbye to the era of central bank orthodoxy and hello to the new era of central bank dependency, says Jeremy McKeown
-
Why investors can no longer trust traditional statistical indicatorsOpinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growthGrowth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estatesThe best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
What we can learn from Britain’s "Dashing Dozen" stocksStocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?
-
The most likely outcome of the AI boom is a big fallOpinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
The rise of Robin Zeng: China’s billionaire battery kingRobin Zeng, a pioneer in EV batteries, is vying with Li Ka-shing for the title of Hong Kong’s richest person. He is typical of a new kind of tycoon in China
-
Europe’s forgotten equities offer value, growth and strong cash flowsOpinion Jonathon Regis, co-portfolio manager, Developed Markets UCITS Strategy, Lansdowne Partners, highlights forgotten equities he'd put his money in
-
How retail investors can gain exposure to Lloyd’s of LondonIt’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
