EM Fund Stock Picks & Country Commentaries (July 4, 2023)
A variety of emerging market fund stock picks (US fund letters or articles) plus following the investor herd into Chinese automation, healthcare or consumer stocks along with AI + battery stock hype.
We have a variety of emerging market fund stock picks (mainly from US fund letters or articles) to highlight this week (among other stocks also getting mentions late on in this post) with some quick takes being:
A number of Chinese automation, health care, and consumer related stocks - most appear to be performing well. However, one of these stocks was recently accused of doing a “round tripping scheme” to generate sales with the accusations seeming to not impact shares much.
A Korean stock that offers a potential compound mispricing opportunity due to owning several potentially valuable standalone subsidiaries in key growth areas.
A Korean entertainment or K-Pop stock that been outperforming and expanding it’s footprint globally.
More Taiwanese tech stocks - including one who’s shares have recently exploded, but a YouTuber has recently made a video noting complaints about their pricey card products cracking (albeit making shoddy products or cutting corners to save money is a tech industry wide phenomenon).
A Latin American education stock who heavily in distance learning during COVID and now shares are rebounding strongly.
Some Indian microfinance or fintech focused bank stocks.
An update on a special situation involving a Latin American stock.
Two key observations for this week: First, our March 21st, June 13th, and last week’s posts covered some fund strategies for investing in China. In this week’s post, a couple of more funds talk about focusing on the Chinese automation (as in industrial automation, robotics, digitization, etc.), healthcare (including biotech, medical devices, etc.) and/or consumer goods or services sectors.
Intuitively, investing in the first two sectors will make sense given China’s aging population along with nearshoring, moving up the manufacturing value chain, and becoming more self sufficient (due to geopolitical tensions) trends. Likewise and even with an aging population and plummeting birth rates, China still has a billion+ consumers.
However, it’s also clear the herd has moved into these stocks as it’s reflected in their recent performance charts. Following the herd is not necessarily bad - when the herd is moving in the right direction. But herds can also stampede off cliffs and has largely been wrong about China quickly reopening with things quickly getting back to “normal.”
That brings me to my second observation concerning so-called artificial intelligence (AI) stocks or stock plays. One fund in this week’s post has noted they are selectively trimming AI related holdings because the recent rally has made their valuations expensive. They are moving into another tech sector that has or will benefit from AI exposure and these stocks have more reasonable valuations.
A quick search reveals there appears to be no true AI ETF - just a few ETFs (ROBO, BOTZ, IRBO & ROBT) that either have AI in their name or purport to invest in AI related stocks as that makes great marketing material. These ETFs are off their peak COVID highs, but are once again rising:
One fund has also noted that it feels like the euphoria over EV battery stocks may have started to fizzle. As with AI ETFs, a number of ETFs purport to offer exposure to EVs and related niches with LIT and BATT having battery in their names. They are also off their COVID highs:
I am reminded of what happened with overhyped 3D printer stock about a decade ago (plus briefly during COVID). Like AI, 3D printing was supposed to be the next “big thing” that would revolutionize the world. However, here is a long-term chart showing the two (DDD & SSYS) 3D printer stocks that managed to survive when the bubble popped:
In other words, hyped AI or EV battery stocks along Chinese stocks in the previously mentioned sectors could still have plenty of room to run. But if (or rather when…) the tide goes out (as inevitably it always does…), you will not want to be caught in it or had entered the water when it was already at peak tide…
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