Hermes' 3 Top Stock Picks from Emerging Markets

Hermes Global Emerging Markets fund manager Gary Greenberg picks three companies he thinks are good for growth

Emma Wall 14 July, 2017 | 9:29AM
Facebook Twitter LinkedIn

This article is part of the Morningstar's Guide to Emerging Market Investing. Click here to find out just what an emerging market is and which regions hold the potential to boost your investment portfolio.



Emma Wall: Hello, and welcome to Morningstar. I am Emma Wall, and here today to his three stock picks is Gary Greenberg, Manager of the Hermes Global Emerging Markets Fund.

Hello, Gary.

Gary Greenberg: Good morning.

Wall: So, what's the first stock today?

Greenberg: I like Alibaba (BABA) a lot. It's listed on the New York Stock Exchange. They are a giant in ecommerce not only is China but increasingly across Asia. Alibaba is really interesting because they have mastered big data and what it can do. And their ability to tailor product offerings to sell on their online malls and their ability to even tailor entertainment is really unmatched. It's becoming the Amazon of Asia.

Wall: But with added services as well, aren't there? I mean, Amazon started off just doing one thing, but Alibaba is moving into financial services, it's moving into social media. It's quite a juggernaut, isn't it?

Greenberg: It's a juggernaut. And they are able to use the artificial intelligence inherited in their system to make information available to all the different parts of their business. In particular, Alibaba's ability in financial services is such that they can make a loan without somebody filling out a form because they know so well what the person is going to do. Their money market fund, which is a subsidiary of Ant Financial, is now up to $200 billion; it's grown 100% in the last six months. So, they are a very powerful company.

Wall: And what's the second stock today?

Greenberg: I like Sberbank (SBER). Sberbank is a very cheap stock. It's the dominant bank in Russia. It's trading at around 5 times earnings. Profitability is good. Management is strong. And Russia, although under sanctions nevertheless may have an end with the U.S. government. So, looking pretty good.

Wall: And what is the third stock today?

Greenberg: We like a company in Taiwan called LandMark Optoelectronics. It's a smaller tech company which makes light-emitting diodes. The point here is that they are able to transmit to blink on and off 15 to 20 billion times a second which basically gives the diode the ability to transmit data at an incredibly fast speed. They are working with Intel on this and the outlook over the next year is very positive for this business.

Wall: And how dependent on Intel are they for that? Because we have seen some smaller tech companies go under, for example, when that Apple contract gets cancelled. Is it a diversified revenue stream?

Greenberg: Yeah. This is a technology which most people are going to need because the speed is important for 5G as it comes in for Internet of Things, et cetera. So, this is a technology which is universally applicable and it's much faster than electricity. So, it's much more efficient. It's the way it's going to go.

Wall: Gary, thank you very much. This is Emma Wall for Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Emma Wall  is former Senior International Editor for Morningstar