EM Fund Stock Picks & Country Commentaries (March 14, 2023)
Emerging market fund China, Korea, Southeast Asia, India and Latin America stock picks plus compound mispricing opportunities and the need to focus on capital allocation instead of dividend policy.
Emerging market fund stock picks for China, Korea, Southeast Asia, India and Latin America (along with other emerging or frontier market countries) are in focus this week as we cover some February and Q4 fund updates or letters. Despite the US tech and now the regional banking meltdown in the wake of Silicon Valley Bank’s collapse, many good stock picks can still be found outside the USA that have not been impacted by these issues.
One fund letter has observed how Chilean copper output and ore quality are both falling (meaning extraction costs are rising). At the same time, protests in Peru have disrupted or shut copper mines there while another country’s government is attempting to extract further concession or royalties out of a foreign copper mining stock.
Another fund talked about so-called compound mispricing opportunities involving Korean along with some European stock picks. Compound mispricings in moated businesses where both a security and the underlying business are mispriced can create some interesting special situations and investment opportunities for investors who have spotted them.
One emerging market fund discussed in detail about why companies and investors should be focused on capital allocation instead of dividend policy. Many American stocks pride themselves on paying a consistent dividend or all but guaranteeing there will be a certain rate of dividend growth every year. However, this fund makes a good case for why dividends should fluctuate or even stop periodically depending on the capital and growth needs of the business. Over the long term, this can lead to exception share price growth as well as avoid the perils or temptation for “diworsification.”
Multiple funds have observed how the Indian stock market is a bit overvalued. However, one fund has noted a valuation gap between large cap and small cap stocks. They and other investors can still capitalize on this spread via investments in lesser-known names across industries.
It has also been noted how Asian exporters have told a fund manager that exports or sales to the USA are collapsing while a Vietnamese seafood company who had already shifted their focus away from the US (due to supply chain costs and no doubt pandemic and California port disruptions) to the Chinese market is thriving. This demonstrates two theses:
The better Asian exporters with a more domestic or regional focus should continue to remain profitable (albeit they may still take a hit to the bottom line) or at least cash flow positive enough to get through a US recession.
What the Western and American corporate media in particular (e.g. Inverse Cramer) is telling you about the American economy and consumer is at odds with what fund managers are being told in Asia (a reason why I rarely link to Bloomberg et al).
Some other stock pick highlights for this week include:
A Korean stock pick offering a so-called compound mispricing opportunity. In this case, shares have declined, but cash flow is rising.
Some Southeast Asian stock picks that are the local stock exchange listings for the local operations of well known multinationals plus a local food stock pick with the right capital allocation versus dividend policy in place.
A European automotive dealership and car rental stock pick active in several emerging or Eastern European markets. The stock operates high-velocity (inventory turns) dealerships - the main performance indicator for such businesses.
Some South African stock picks demonstrating how (despite facing blackouts and many other problems) many local companies are still growing with shares outperforming (or having the potential to outperform).
A special situation involving a Latin American infrastructure stock pick.
A Latin American equipment leasing stock pick who also supplies mining equipment for copper mines.
Finally, I have gone through all old pay-walled posts to add tickers for major stock exchanges (NOTE: Some OTC tickers were left off IF the ticker sees little trading volume) linked to sites such as Finvix, Google Finance (set to open as a 1 year chart), or where ever else stock quotes can be found:
EM Fund Stock Picks & Country Commentaries (February 28, 2023)
EM Fund Stock Picks & Country Commentaries (February 21, 2023)
EM Fund Stock Picks & Country Commentaries (February 14, 2023)
EM Fund Stock Picks & Country Commentaries (February 7, 2023)
EM Fund Stock Picks & Country Commentaries (January 31, 2023)
EM Fund Stock Picks & Country Commentaries (January 24, 2023)
At first I thought doing this would clutter the posts since many emerging market stocks have multiple listings with significant trading volume. However, I think its more important to show readers all the major stock exchanges any stock pick mentioned trades on (where shares have a reasonable amount of trading volume).
For other Americans, there is probably a perception that any stock not listed on a major US-exchange (the NYSE or NASDAQ) will be difficult to invest in, not have significant trading volume, or there will be limited information available (NOTE: As much as possible, I have linked any stock mentioned directly to their Investor Relations pages).
However, many emerging market stocks (especially Chinese stocks) now have listings on the Frankfurt Stock Exchange rather than London or a USA exchange (e.g. Chinese share sales in Europe gain importance as financing tool, UBS exec says). The same can be said for South African stocks who maintain listings in Frankfurt or on the London Stock Exchange.
Substack’s search features are also still fairly basic and leave more to be desired, but company names or their tickers should (generally… ) appear when searched for on the front page (or by hitting the Ctrl-F search function when viewing a post or page on most browsers):
Likewise, and as with the previous March 7th post, as many screenshots of 1-year charts (as possible) are included in this post along with as many 1-year charts for the primary ticker as possible.
Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.
For a further disclaimer and an explanation of the reasoning behind these posts: DISCLAIMER: EM Fund Stock Picks & Country Commentaries Posts.
Note: Where possible, company links are to their respective investor relations or corporate pages. Region and country links are to our ADR or ETF pages where there are further country specific resources (e.g. links to local stock markets and media websites). Please report any bad links in the comments section.