Three Best Buys from a Global Guru

03/20/2014 10:00 am EST


Yiannis Mostrous

Editor, The Capitalist Times

Despite the sell-off of emerging markets, the group's long-term growth story remains intact; here, we highlight the best ideas for patient investors looking to add exposure to this theme, says global expert Yiannis Mostrous, editor of Capitalist Times.

Once the panic and jitters abate, China and other emerging markets in Asia will deliver solid returns to investors. Patient investors with an eye on Asia should favor markets that exhibit the following qualities:

  • A current account surplus;

  • Meaningful exposure to global trade;

  • Favorable valuations;

  • And steady upward revisions to analysts' consensus earnings estimates.

Here are three stocks that meet our criteria.

Keppel Corp. (SP:KEP) (OP:KPELY)

Keppel’s offshore and marine business continues to enjoy robust demand for drilling rigs, a trend that we expect to continue as the industry demobilizes older equipment and replaces them with higher-specification units.

Keppel has already secured about 20% of its annual sales target, suggesting that 2014 could be another strong year for the company. Trading at 10.2 times earnings and 1.9 times book value, Keppel’s American depositary receipt (ADR) rates a buy up to US$18.00.

Cheung Kong Holdings (HK:1)

A Hong Kong-based developer of residential properties, Cheung Kong trades at a discount to its net asset value, because of the firm’s complicated nature and diverse business interests.

Even when you take into account the relative volatility of the company’s earnings—a product of lumpy project completions—the stock looks cheap at nine times earnings.

With a strong balance sheet, net debt to equity of about 14% and access to inexpensive financing, Cheung Kong Holdings stands out among its peers and rates a buy up to HK$145.

Sinopec Kantons Holdings (HK:934)

Sinopec Kantons Holdings, which engages primarily in crude-oil trading and operates terminals and logistics associated with this business, is our top small-capitalization stock for aggressive investors. (The firm is controlled by Sinopec, one of China’s three-largest integrated oil companies.)

Over the past three years, Sinopec Kantons Holdings has acquired a total of nine projects in China, the Middle East, Europe, and Indonesia. More recently, the company entered the LNG shipping business.

And with US$269 million in net cash on its balance sheet, the firm should continue to acquire assets from its parent company and expand internationally.

Buy Sinopec Kantons Holdings up to HK$8.50 per share.

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