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.
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