Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns on capital, and are on attractive valuations.

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. 

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. 

Recommended

Zoopla: house prices stalled at the end of 2022
House prices

Zoopla: house prices stalled at the end of 2022

The property market looks primed for a slow burn start, and buyers are turning towards flats instead of homes as they prioritise affordability, latest…
30 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Best regular savings accounts – January 2023
Savings

Best regular savings accounts – January 2023

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
27 Jan 2023
Equity release v downsizing – which is best?
Personal finance

Equity release v downsizing – which is best?

Equity release hit a record high in 2022. But is downsizing a better way to hold on to your money?
27 Jan 2023

Most Popular

Council tax increases 2023 – how much more will you pay?
Tax

Council tax increases 2023 – how much more will you pay?

Your council tax bill will go up in April - we reveal the councils that have confirmed what this year’s increase will be.
23 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023