3 quality value stocks to buy

The top stocks to buy now, according to Fay Ren of Cerno Capital.

Nabtesco exhibition stand
Nabtesco should profit from rising capital spending and rising inflation
(Image credit: © Thomas Lukassek / Alamy)

The best stocks to buy now, says Fay Ren of Cerno Capital, are those businesses that have “an enduring competitive advantage and makes them highly profitable.”

And one of the best regions in the world to look for these enterprises is Asia.

This region is “home to a wealth of innovative businesses generating valuable intellectual property.”

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Here are three of Cerno’s Asian stocks to buy today. Unfortunately, most of these companies do not support dividends.

Asian stocks to buy for growth

Top of the stocks to buy in robotics: Nabtesco

Cerno likes Nabtesco (Tokyo: 6268), a Japanese manufacturer of mechanical components relating to motion control.

This company “holds leadership positions across a wide portfolio of niche products,” including reducer gears for industrial robots.

These are critical components, representing “one-third of the total cost of a robot arm.”

The group has a 60% share of the market globally, Ren notes and it supplies all of the global big four robot makers (Yaskawa, Fanuc, ABB, and Kuka).

“The competitive edge of this business is a product of the group’s technology leadership,” according to the fund manager. This has been “developed over decades of cumulative R&D and know-how, as well as the deep relationship with its customers.”

Overall, this is a business that’s “geared to the global industrial automation trend” and it should profit from rising capital spending and rising inflation.

A market leader: Hamamatsu Photonics

Staying in Japan, Ren also liked Hamamatsu Photonics (Tokyo: 6965).

The company specialises in optoelectronics technology that “detects, measures and generates various types of light spanning the spectrum from x-ray to infrared.”

It is a leading play in many of its markets, and it “devotes considerable sums to research and development (R&D) in order to investigate the properties of light and find new opportunities in high-growth areas such as lithium-ion battery inspection and Lidar sensors for the electric-vehicle industry.”

This spending should help the firm maintain its edge over the competition, and its leading position in key markets, driving growth over the coming years as industrial spending grows.

One of the best stocks to buy for growth in China: Glodon

Lastly, Cerno likes Glodon (Shanghai: 002410) the largest construction-cost estimation software provider in China.

The group has a 70% share of the market and is “positioning itself as a platform software provider to the construction industry, expanding into adjacent areas including intelligent project management, procurement, and design.”

The business aims to make itself an integrated one-stop solution for customers in the construction sector, which typically use different systems to manage different projects.

The market opportunity is vast. “Construction is a major pillar of the Chinese economy at 25% of GDP,” the fund manager notes, but it ranks as “one of the least-digitalised industries.”

Cheap labour costs mean companies have had no incentive to improve efficiency. However, with wages rising and demand slowing, “there is a push from central government to digitalise.”

The government is also keen to get businesses to improve their efficiency. “Unlike many areas of the economy, this is a sector with regulatory tailwinds,” Cerno notes.

Rupert Hargreaves

Rupert was the former Deputy Digital Editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. 

His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks. 

Rupert has freelanced as a financial journalist for 10 years, writing for several UK and international publications aimed at a range of readers, from the first timer to experienced high net wealth individuals and fund managers. During this time he had developed a deep understanding of the financial markets and the factors that influence them. 

He has written for the Motley Fool, Gurufocus and ValueWalk among others. Rupert has also founded and managed several businesses, including New York-based hedge fund newsletter, Hidden Value Stocks, written over 20 ebooks and appeared as an expert commentator on the BBC World Service. 

He has achieved the CFA UK Certificate in Investment Management, Chartered Institute for Securities & Investment Investment Advice Diploma and Chartered Institute for Securities & Investment Private Client Investment Advice & Management (PCIAM) qualification.