Opinion: Christmas Crackers – Asset managers hot stock picks for 2018

Jacob Mitchell, CIO of Antipodes Partners and manager of the Antipodes Global Fund – UCITS

Samsung Electronics

For a long time, minority shareholders in Korea have been negatively impacted by an unhealthy closeness between chaebol-controlled conglomerates and the government. However, newly elected government officials are beginning to position themselves independently of the country’s most powerful families and are implementing reform to eliminate many of the shareholder unfriendly actions that have been prevalent in the country.

We are bullish on the prospects for Korea and have an approximate 10% net long exposure to the country. Korea remains a cheap market and the prospect for continued corporate governance reform heightens our appeal towards the country.

Despite a strong run in recent years, we are still optimistic on Samsung Electronics, which is trading on an ex-cash P/E below 8x. While the group has had to overcome corporate governance issues in recent times, it is continuing to improve its operational structure and is pursuing a more shareholder-friendly dividend pay-out and share buyback policy – the significance of which should not be underestimated.

Oliver Bell, portfolio manager of the T. Rowe Price Frontier Markets Equity Fund

Guaranty Trust Bank

One stock we are currently optimistic on is Guaranty Trust Bank, and we have been adding to our position in the stock over recent months. A high-quality Nigerian financial institution, we believe Guaranty Trust Bank stands to benefit from the stabilisation of politics and improving macroeconomic backdrop in the country.

Nigeria faces a mix of challenges, but recent exchange rate reform and new infrastructure projects are resulting in a gradual recovery for the economy. Greater reform momentum, sustained oil production and a further currency correction will be necessary supports.

Guaranty, which is predominantly a corporate lender and is the third-largest Nigerian bank by market share, was trading at an attractive entry point in the third quarter, following the recent adjustment in the naira currency and we took advantage of the valuation to increase our exposure. With 200 branches in Nigeria, the bank also has small operations in some other African counties, as well as in the UK, where it services overseas nationals.

Jeremy Lang, partner and co-founder of Ardevora Asset Management

Abcam

Abcam is an unusual company. It was founded in 1998 by three Cambridge academics that had the idea of making it easier for research scientists to buy antibodies across the web. The business has diversified since the early days and more recently has moved into the direct production of biotechnological products. The rapid growth of the company, in addition to the changing and highly specialised nature of the business, has made it difficult for analysts and investors to value.

The requirement to invest in the business has held profits back for extended periods of Abcam’s life. As a result, the shares have generally looked expensive, analysts have been twitchy, and this has induced anxiety in the hearts of investors. 

To us, Abcam still looks interesting. Being an unusual business makes it difficult for analysts to value. There is no obvious peer group to compare it with. Yes, the headline numbers suggest the shares are expensive, but management has been consistent and clear in the plans for the business. Current investment is being made to ensure the company has the best possible chance of taking advantage of the significant growth opportunities that lie ahead. Management behaviour looks sensible to us. The company is lucky to have these opportunities in a world where growth is hard to come by. For investors who are prepared to look forwards rather than backwards, we think patience will be well rewarded.

ABOUT THE AUTHOR
Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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