I have a simple investment philosophy: buy good businesses run by competent and honest people, and buy them at a price that leaves enough of a margin of safety for mistakes or bad luck. I try to buy companies that other people are not looking at. That is where I find bargains and an adequate margin of safety, but it also tends to lead me away from big stocks.
As a result, Fidelity Asian Values has most of its capital deployed in small companies (those with a market capitalisation of up to £5bn); stocks above that threshold only make up about 15% of the trust’s holdings as at the end of July 2021. The trust also has a value bias given my focus on companies that are mispriced, either because they are yet to be discovered by investors or are currently undervalued owing to near-term concerns.
Growth focus has left value cheap
I feel the current focus on themes and growth stocks is a great opportunity. The pivot towards growth stocks between 2016 and 2020 has led to the widest dispersion between growth and value stocks in almost 100 years (similar to the situation in 1999). This bifurcated market in terms of valuations has allowed me to build positions in businesses with long-duration cashflows and good management at attractive prices.
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
Given the broad investment universe of the trust includes the whole of Asia (excluding Japan), I can pick from a diverse range of companies across various sectors and geographies from India to the Philippines and I am excited by our holdings in the trust today. We own a portfolio of businesses which are dominant in their industries, earn good returns on capital and are available at attractive valuations.
An attractive yield from hydropower
NHPC (Mumbai: NHPC) is a 100% hydro-electric power generation company in India, operating run-of-the-river power stations. Its current capacity of seven gigawatts will expand to 12 gigawatts with the addition of new hydroelectric power projects over the next two-to-three years. The stock offers a good bargain as it trades at about seven times its 12-month forward earnings and provides a 6%-7% dividend yield. The price/earnings (p/e) ratio is set to drop further to five times as the new power plants start to generate earnings.
A market-leading online broker
Kiwoom Securities (Seoul: 039490) is South Korea’s largest online brokerage firm with a 30% share of the domestic market. The company has built an enduring moat based on best-in-class customer service, technology interfaces and value-added services. The stock trades at about four times its 12-month forward earnings and should be able to grow well in next five years as it adds distribution of savings products and foreign exchange services to its product offering.
IT in Indonesia
Metrodata Electronics (Jakarta: MTDL) is Indonesia’s largest information technology (IT) products distributor and is among the leading players in IT consulting, implementation and system integration. The stock has performed reasonably well since we initiated our position last year during the coronavirus-driven panic. However, Metrodata is still trading on an attractive valuation at 11-12 times forward earnings with net cash on its balance sheet and 20% return on equity. It should be able to grow at 5%-10% annually for the next five years.
-
‘I installed a heat pump in my home – here are five things I’ve learnt’From the size and noise of a heat pump to how much it costs to run one, Ruth Emery reveals what she’s learnt after installing one in her home six months ago
-
3 ways to work out if a stock is good valueThe only thing you can really control in investing is the price you pay for an asset – but how can you tell if you’re getting a good deal when it comes to the price of a stock?
-
'Technology will determine tomorrow’s top stocks in emerging markets'Opinion John Citron, investment manager of the JPMorgan Emerging Markets Investment Trust, tells us where he’d put his money
-
Two ways to tap into monopoly profits from airportsMost investors can’t get their hands on airports. Here are two ways you can
-
Three British mid-caps that could make 'attractive' investmentsOpinion Charles Luke, manager of the Murray Income Trust, highlights three UK-listed mid-cap companies, as he tells us where he'd put his money
-
Fat profits: should you invest in weight-loss drugs?The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategyRamsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance marketThe insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocksOpinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
LendInvest: a promising fintech firm going cheapOpinion LendInvest has made some mistakes in the past, but it’s now primed for growth, says Rupert Hargreaves
