The future belongs to emerging markets – three EM stocks to buy now

Professional investor Carlos von Hardenberg of Mobius Capital Partners picks three of his favourite emerging-market stocks.

For decades Mark Mobius and I have managed various emerging and frontier-markets funds, including Templeton Emerging Markets Investment Trust, the largest London-listed emerging-market trust. Just over three years ago we founded Mobius Capital Partners, aiming to offer a truly different investment approach to capture the most exciting opportunities in emerging and frontier markets. 

We decided on four key principles. We focus on one concentrated strategy only and limit the portfolio’s size; we invest in the highest-quality emerging businesses, with deep moats (sustainable competitive advantages that fend off rivals); we use non-traditional sources to underpin our conviction in our choices; and we act as partners and real investors through constructive engagement with our portfolio companies. 

We believe that active investing can deliver outsized returns, particularly in the rather inefficient small- and mid-cap sectors in emerging and frontier markets. Our formula has already delivered strong results, making the Mobius Investment Trust one of the best-performing strategies in its segment. 

The opportunities in emerging and frontier markets are changing rapidly. There is a new wave of innovation with new business models. With over 80% of the world’s population living in emerging markets and household incomes gradually rising, the needs of the future are very different from the needs of the past.

Africa’s top payment-app

One exciting example is Safaricom (Nairobi: SCOM) in East Africa, which has migrated from providing more traditional communication services to offering the largest mobile-payment application on the continent. It has just launched a “super-app” to enhance customers’ experience. 

In Asia in particular we are witnessing an economic “miracle” comparable to the post-war developments in Europe: a unique and versatile ecosystem increasingly dominating the world in innovative technologies. In sectors such as factory automation, sensor technology, autonomous driving, consumer electronics, the internet of things (IOT), artificial intelligence and alternative energy, Asia is taking a global lead. 

A healthcare supercycle

We are convinced that spending on services, especially healthcare and education, could turn into the supercycle of the next decade. Take Metropolis Healthcare (Mumbai: METROHL). It is a leading provider of medical and laboratory services in India. 

Metropolis offers pathology testing, imaging and nuclear medicine, clinical trials, and home-care services. It started as a single laboratory and today operates over 124 clinical laboratories with 2,400 collection centres across seven countries.

Another example is EC Healthcare (Hong Kong: 2138), which operates Hong Kong’s largest non-hospital medical network with over 60 centres in greater China. These are examples of the type of mid-cap company our strategy focuses on. They are often run by the founding entrepreneurs; they have a very dynamic culture and attract great talent; and they are highly innovative with sound balance sheets, excellent management teams and strong local brands. They are often overlooked by the market, but thorough research by our experts helps us identify these leaders of tomorrow.

Recommended

Britain’s ten most-hated shares – w/e 20 May
Stocks and shares

Britain’s ten most-hated shares – w/e 20 May

Rupert Hargreaves looks at Britain's ten-most hated shares, and what short-sellers are looking right now.
23 May 2022
Britain's most-bought shares w/e 20 May
Stocks and shares

Britain's most-bought shares w/e 20 May

A look at Britain's most-bought shares in the week ending 13 May, providing an insight into how investors are thinking and where opportunities may lie…
23 May 2022
Director dealings w/e 20 May: what company insiders are buying and selling
Stocks and shares

Director dealings w/e 20 May: what company insiders are buying and selling

Directors’ share dealings can often give investors an insight into the sentiment of company insiders. Here are some of the biggest deals by company di…
23 May 2022
Amazon’s shares have fallen hard – value investors should take note
Share tips

Amazon’s shares have fallen hard – value investors should take note

Investors have dumped Amazon shares as post-pandemic life returns to normal. But it still has plenty of competitive advantages, says Russell Hargreave…
23 May 2022

Most Popular

Imperial Brands has an 8.3% yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% yield – but what’s the catch?

Tobacco company Imperial Brands boasts an impressive dividend yield, and the shares look cheap. But investors should beware, says Rupert Hargreaves. H…
20 May 2022
Barry Norris: we’re already in the 1970s. Here’s how to invest
Investment strategy

Barry Norris: we’re already in the 1970s. Here’s how to invest

Merryn talks to Barry Norris of Argonaut capital about the parallels between now and the 1970s; the transition to “green” energy; and the one sector w…
19 May 2022
Share tips of the week – 20 May
Share tips

Share tips of the week – 20 May

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 May 2022