If you’re looking to invest in Asia, then small-cap value stocks in Asia look favourable.
According to Fidelity’s Bajaj, three key characteristics to look for are: the company should have a good product that customers want and are ready to pay for, so that the business can make a high return on capital (a key gauge of profitability); second, it should be managed by honest and competent people; and third, it should be available at a good price, which means it should offer enough of a margin of safety to take into account accidents, adverse events and mistakes.
“Most of Fidelity Asian Values’ capital is deployed in small-cap value stocks in Asia. Despite recent outperformance, small-cap value stocks are trading at a significant discount to growth stocks – even greater than the gap seen around the turn of the millennium,” says Bajaj.
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
Here are three best value Asian stocks worth a look.
RFM Corporation (Manila: RFM)
RFM Corporation has a solid ice-cream franchise in the Philippines thanks to a 50-50 joint venture with Wall’s (a Unilever brand). The group’s brands, Selecta and Wall’s, have a market share of more than 70% in a sector that is expanding at a low double-digit annual rate as ice cream becomes increasingly popular, according to Fidelity.
“It is difficult for potential rivals to gain a foothold in the market because the company gives its cabinet freezers to mom-and-pop stores for free in exchange for a prime spot on the shelf for its ice creams. These stores don’t have space for a second cabinet freezer and tend to choose to sell RFM’s brands because of their popularity among consumers,” says Bajaj.
Uni-Charm Indonesia (Jakarta: UCID)
Uni-Charm Indonesia is a subsidiary of Japan’s Uni-Charm. It is the country’s largest producer of nappies and sanitary towels. Market penetration remains low. “The strong reputation of the brands constitutes an enduring competitive advantage, helping to ensure these markets remain oligopolies. As a result, the company enjoys stable growth and high returns on invested capital. Uni-Charm Indonesia has a clean balance sheet,” Bajaj adds.
Teejay Lanka (Colombo: TJL)
Teejay Lanka, Sri Lanka’s largest fabric mill, is a textile manufacturer benefiting from supply chains diversifying out of China. Owned by Brandix and Pacific Textile, it operates fabric mills in India and Sri Lanka, and sells to brands such as Nike, Uniqlo, Tommy Hilfiger and Calvin Klein.
“The management has a strong record in growing consistently, profitably and with prudent capital allocation,” Bajaj says.
-
Barclays warns of significant rise in social media investment scamsInvestment scam victims are losing an average £14k, with 61% of those falling for one over social media. Here's how to spot one and keep your money safe
-
Over a thousand savings accounts now offer inflation-busting rates – how long will they stick around?The rate of UK inflation slowed again in March, boosting the opportunity for savers to earn real returns on cash in the bank. But you will need to act fast to secure the best deals.
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsWe round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
