Welcome to Morningstar's 3 Stock Picks. I'm Holly Black with me is Austin Forey, he's manager of the
JPMorgan Emerging Markets Trust. Hello. Good morning.
So, you've got 3 stock picks for us today. Where would you like to start?
So, I think I might start unusually in Argentina. We have a company called Globant. Now this is a
software services company who do work for major western corporations like Disney. And what is
interesting about this company is it sits at the intersection of design and technology and they
enable it. They're enabling the digitalization of large businesses, particularly with emphasis
on the way the customer experiences that business. Been growing at about 20% a year for a long time.
It's a stock we've owned for a few years already and I think it points to two themes that have
been really important for us in the portfolio. The first is it's whole process of digitalization and
what it's doing to industries and the companies that enable that actually have fantastic long-term
growth opportunity in front of them. And secondly it's a classic illustration of why
we pick stocks, not countries. You know, if you said to me go and look at Argentina, my
reaction as an economy will be not the world's greatest economy. But if you can find really
interesting export facing businesses there, you can still find some terrific investments.
So, this company makes the wristbands that you wear for FastPasses and stuff at theme parks.
Has that been impacted by the Covid outbreak? Because obviously a lot of these businesses
would have been entirely shut down for months. So some of the work they've done obviously has
been slightly slowed down this year, but actually, if anything the pandemic is also
pushing their customers to invest faster in this kind of process of digitalization, so
I think they're actually looking forward, the growth opportunities are pretty much unchanged.
Okay what is stock number 2? The stock number 2 is a company called Zhejiang
Supor. Now this is an A share company in China, so it's listed in the domestic market in China.
It makes small kitchen appliances, things like blenders, rice cookers, that kind of thing,
not big things like refrigerators. We are talking about kind of stuff that you
and I have in the kitchen sitting on top of worktops. It is a subsidiary of a well-known
western company called SEB, which is one of the world's leading players in the industry.
And we like this company further for two or three very simple reasons. It's a phenomenally
profitable business. It's generating really strong returns and a lot of cash in the balance sheet, so
really financially low risk business. So, big growth opportunities. And it has taken
advantage of I think of all the opportunities that exist in the emerging consumer world, you
know as incomes rise, people buy more and more of these things and this has been a great investment
in the past. It's been a good industry to be invested in the west for a long time and we have
big hopes that the same patterns will play out as Chinese consumers become more affluent.
And their products, which are tailored to local demands and can continue to drive revenue growth.
Now these A share stocks, the domestic stocks, weren't always easily accessible to international
investors, so has the opening up of that market created a lot of new opportunities for you?
Well it's hard to overstate how important it has been, you know if you look at China 5 or
maybe 10 years ago, the opportunity set for people like us was big state owned companies
in mature industries like oil and banking and telecoms. In A share markets where you find lot
of the private sector businesses. It's where you find all the entrepreneurialism, and if you look
at the size of the A share market, I mean it's very significant. It's come close to increasing
our opportunity set by probably 50% or more. So, it's been a really exciting development for us.
Okay, let's move on to our final stock. So, our final stock probably
better known than the first two. My final stock's Alibaba, which is the Chinese eCommerce giant.
And there's a few things I think to say about this. One is clearly the whole trend towards
eCommerce continues its pretty strong in China and we don't see that changing anytime soon it's
being accelerated by the pandemic this year. But there's so much more going on in Alibaba. I think
there's two particular things I draw attention to. The first is it also operates the leading
digital payments network in China with more the 700 million people every month using the Alipay
network. And secondly it's also the leading cloud services provider in China, so it's
building a business very similar to Amazon Web Services. And those things I think give it lots
of growth into the long term above and beyond what it's already doing in eCommerce. So, it's been a
phenomenal business actually in the past and we see it just getting stronger in the future.
Austin, thank you so much for your time. For Morningstar I'm Holly black.