The all-singing, all-dancing Asian trust that sticks to winning formula
The investment column that makes the most of your money
THERE are almost 18,000 listed companies in the Asia-Pacific region, excluding Japan. That is more than the rest of the world put together and six times more than are quoted on the UK market. Most of these Asian businesses are small and unknown by big international investors. But many of them are growing fast and offer generous yields as well.
Fidelity Asian Values, an investment trust, aims to find some of the most promising firms among those 18,000, invest in them and deliver annual returns of more than 10 per cent.
The shares are 387p and have performed well in recent months, but they should continue to increase in price over the coming few years.
Fidelity Asian Values is run by Nitin Bajaj, a Singapore-based investment expert with a track record of success and straightforward views on how best to pick stocks that are going to generate the highest returns.
The fund invests in a broad mix of about 160 companies, which range in size from £25million to £20billion, though most are at the smaller end. In each case, Bajaj looks for businesses which he believes can deliver a 50 per cent return over three years, from a blend of dividends and share price growth.
Finding these companies is not easy, but Bajaj has certain rules that he sticks to rigidly.
First, they need to be good businesses that are growing fast. Second, they need to be run by people he trusts. And third, they need to be undervalued on the stock market. The formula sounds simple and logical – and it works.
Bajaj began managing the fund in April 2015, since when the combined value of the companies in the portfolio has surged and the trust’s share price has doubled. Bajaj also invests only in businesses that he really understands, operating in sectors that are likely to benefit from long-term growth.
One investment, for example, is Lion Brewery Ceylon, which brews and markets beer in Sri Lanka, including Carlsberg. More than 80 per cent of the beer consumed in Sri Lanka is Carlsberg, but current consumption is very low as the country was ravaged by a protracted civil war and is still recovering from decades of violence and economic hardship.
As Sri Lankans become more prosperous, Bajaj expects beer consumption to increase and Lion Brewery shares to rise.
Other investments include BFI, a commercial vehicle finance firm in Indonesia, whose share price was extremely cheap at the time of investment, even though the business was growing at 8 to 12 per cent a year and offering a dividend yield of 9 per cent.
The trust owns shares in a Bollywood studio in Mumbai, a tutoring business in China, a semi-conductor firm in Taiwan and the operator of the national electricity grid in India. Fidelity Asian Values’ remit even extends to Australia and New Zealand, so it has invested in an Australian child care group and has shares in a couple of fast-growing firms in New Zealand, too.
Bajaj describes himself as a contrarian investor so he tends to look at countries and sectors that are out of favour with mainstream stock pickers. He was very interested in India at the turn of the century, when few others were. Recently, he has been finding attractive opportunities in Korea, a country riven by political and corporate scandals.
Bajaj works with a team of four, all of whom travel extensively through Asia and Australasia, looking for potential investments. The group also benefits because Fidelity is a global investment firm, employing thousands of people worldwide, so local experts can feed into Bajaj’s research.
Some decisions are made in a few weeks, others take several years. In each case, however, Bajaj is ruthlessly focused on delivering growth and making money for investors.
Midas verdict: Fidelity Asian Values’ manager, Nitin Bajaj, believes that he should treat every investment decision as if it involved his own money, a position made that much easier as he owns a significant number of shares in the fund. His approach has delivered impressive results over the past two years, but there is plenty of growth to come. At 387p, the shares are a long-term buy.
WHEN Colin Croft took the helm at Jupiter Emerging European Opportunities Fund in early 2014, he must have thought that opportunity knocks.
Having co-managed it for the previous four years with the highly regarded but financial crisis-weary Elena Shaftan and been involved with it as an analyst since 2006, it was finally his moment to grab the spotlight.
But Croft has not had an easy time of it. Both 2014 and 2015 were difficult years as the fund suffered from the economic sanctions imposed on Russia as a result of its actions in Ukraine.
It is only in the past 15 months that the fund’s fortunes have turned around for the better.
Remarkably, Croft has stayed in good spirits. ‘Yes 2014 and 2015 were difficult years, and before them all the fallout caused by the 2008 financial crisis,’ he says. ‘But as an investment manager, you have to accept short-term volatility and cling to the belief that long-term your investment approach will work.’
The performance numbers are certainly a mixed bag. Over the past year, the fund has returned 43 per cent, buoyed primarily by rising oil prices. Croft’s 42-strong portfolio is heavily skewed towards oil and gas stocks, as well as financials.
But over ten years, losses of 3.6 per cent have been registered. Since launch in 2002, the numbers are far more impressive, with an overall return of 333 per cent, against 106 per cent for the FTSE All-Share Index.
The immediate future looks rosier than for a long time. He says: ‘The Russian stock market had a great 2016, up in sterling terms by more than 80 per cent. Despite this bounce, company valuations still look attractive and there are dividend yields of six per cent available.
‘There is also the Donald Trump factor. The US President has said some nice things about Vladimir Putin and Russia. In time, it might lead to an easing of sanctions, but then it might not. All the same, the Russian economy is in slow expansion mode. Yes, Russian politics are difficult to grasp, but it does not mean you cannot make money from Russian equities.’
The biggest contributor to the fund’s recent performance is Russia’s Sberbank. Now representing more than nine per cent of the fund’s portfolio, Croft is reluctant to take profits. ‘Its share price still looks cheap,’ he maintains.
Though the fund’s biggest geographic exposure is Russia (57 per cent), Croft has holdings in six other eastern European stock markets. While Poland is the next largest, he is most excited about Romania.
He says: ‘The economy is in growth mode and competitive labour costs mean companies are keen to build factories there. It also has low debt, both at a consumer and government level.’
His biggest Romanian holding is Banca Transilvania. Croft believes eastern European economies are on track to enjoy at least five years of ‘high growth’. He is also pleased that corporate governance standards are improving there, giving him more comfort when scrutinising company accounts.
Bosses of most of the companies he holds shares in also visit London regularly, while he goes to eastern Europe at least once a year.
‘I see the fund as a diversification asset for UK investors’, he says.