3 Asia Pacific Stock Picks

VIDEO: Fay Ren, manager of the Cerno Pacific fund, talks medical research, semiconductors and power tools 

Holly Black 29 September, 2021 | 10:18AM
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Holly Black: Welcome to Morningstar's "3 Stock Picks". I'm Holly Black. With me is Fay Ren, she's manager of the Cerno Pacific Fund. Hello.

Fay Ren: Good morning, Holly.

Black: So you've got three stocks from the portfolio for us today. Where should we start?

Ren: Let's start with WuXi AppTec. WuXi is the largest contract research manufacturer in Asia. It is based in China, but it provides highly technical and time critical R&D outsourcing services for global pharma and biotech companies. So essentially helping them to conduct preclinical research, clinical trials, develop and manufacture the drugs, basically speeding up the process of bringing a drug from the discovery to market.

Black: This really ties into your focus on innovation in the fund, what is it you like about this company?

Ren:Yes, so this company benefits from the innovation of its customers, whilst being an innovator in its own right. Its competitive edge really lies on the fact that it has to be at the forefront of science. It's got a large pool of very highly technical and skilled personnel with knowledge in biology, chemistry, medical sciences, et cetera.

Black: Okay, and what is stock number two.

Ren: Stock number two is Tokyo Electron. This is a Japanese semiconductor equipment manufacturer and one of the top four makers globally, along with the likes of ASML, which people might be more familiar with. It owns 15% of the equipment market, but 60% to 80%, in its own specialisation. So operating a highly consolidated oligopolistic market. So we hear a lot about the foundries like TSMC, and Samsung, but it's Tokyo Electron's machines that go into these foundries that enable them to make the next generation cutting edge chips.

Black: And we know there's been a real supply shortage in this industry over the past year or so. Has that been a good thing for this firm?

Ren: Yes. So Tokyo has seen very strong demand acceleration. They're forecasting -- they have actually upgraded their forecast for this year and next and benefiting from this new CapEx cycle that's going into semiconductors.

Black: Okay, and what is our final stock.

Ren: The final stock is Techtronic Industries, which is in the business of designing and manufacturing power tools and hand tools. And it's the second largest global player, having overtaken some of the more well-known names such as Bosch and Makita in recent years. So the company owns a portfolio of leading brands across both professional and consumer lines with brands such as Milwaukee and RYOBI and they sell predominantly into the U.S. and increasingly European markets.

Black: Fantastic. Fay, 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