Three emerging markets stock picks –Mobius Capital Partners

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
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.

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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.

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