3 Emerging Market Stock Picks

VIDEO: Mobius Investment Trust's Carlos Hardenberg talks emerging markets opportunities in healthcare and fingerprint recognition software companies 

Holly Black 1 December, 2020 | 2:26PM
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Holly Black: Welcome to Morningstar's 3 Stock Picks. I'm Holly Black. With me is Carlos Hardenberg. He is Manager of the Mobius Investment Trust. Hello.

Carlos Hardenberg: Hi, Holly. How are you?

Black: So, you have three emerging market stock picks for us today. Where would you like to start?

Hardenberg: Well, the first one for me is to break the rule, I want four. The first one is our fund which gives you exposure to probably one of the most unique set of companies in frontier and emerging markets which you otherwise can't get exposure to, or at least is very hard.

Then, when it comes down to companies, I would say – I would start in China. China is in itself – is a world in itself, is a consumer market in itself and we're seeing that there are about 350 million pensioners in China, which is give and take a bit smaller than the entire European Union. And that's just the pensioners and they are getting older and older and they're getting richer and richer. And they, of course, have special demands and one of them is they need better working knees, better working hips and therefore, we invested in one of the leading producers of orthopedic implants in China, gaining market share, winning against foreign imports into China, developing new technology, now also exporting from China. And they are doing phenomenally well. The company is called AK Medical is run by the founder and his wife.

The second one would be similarly in the healthcare sector, but this time it would be in Brazil, on the other side of the world. Again, a very large domestic market and a very underserved market when it comes to healthcare services. And we invested in the second largest diagnostic center in Brazil offering branded premium services to more – well, affluent is maybe a bit too far – but to consumers which can afford this kind of service, and it's from blood tests to corona tests to MRIs, CT scans, anything that's needed, they're offering, and they are now moving into telemedicine. So, that's the next big step that they're moving into.

Black: We know that this year Brazil has really struggled to get a grip on its COVID-19 outbreak. So, how has that stock fared in light of that?

Hardenberg: Fleury has done pretty well. Of course, at the beginning, nobody was doing well, and everything was sold off and everybody suffered. And of course, they also, not just the share price but in terms of footfall into these centers, went down dramatically because people simply stayed at home. But that's what makes a good company. A good company is always ready and well-prepared for the unforeseen. And that means you have to have a solid balance sheet. You have to have strong relationships to your clients, also to your landlords, they're renting a lot of the spaces and they have to have a conservative capital structure. And that's all what they have in place. They were very well-capitalized so they were able to endure this period quite well and recovered very nicely and now aggressively moved further into telemedicine, which is a big thing because especially online consulting which Europe is still struggling to get into is becoming very quickly mainstream in some of those markets.

Black: Okay. And what is our final stock today?

Hardenberg: The final stock today is really a beautiful little business run by very, very smart engineers and scientists. It's called eMemory. And what eMemory really does, if I would use the technical terms, I would fail to understand it, but what they really do is, it's called embedded nonvolatile memory and they are an intellectual property developer for the semiconductor industry. And ultimately, they've developed special programs that facilitate, for example, face recognition, under-glass fingerprint recognition and now furthermore, that's what's driving the shares currently is they are providing special solutions for end products, which make them safer and which make them safer from external attacks, including the devices we are currently speaking over. So, that's of course, especially since we are now in this work from home environment where big corporates have to worry about external attacks and have to make these remote devices safer, this company is doing extremely well in benefiting from the current period.

Black: Lovely. Carlos, thank you so much for your time. For Morningstar, I'm Holly Black.

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.

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Holly Black  is Senior Editor, Morningstar.co.uk


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