Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Fidelity star manager names top Asia small cap stock picks

Citywire AA rated Nitin Bajaj says that he avoids sectors that are considered 'in vogue' when choosing stocks.

Small caps, big opportunities

When it comes to stock picking, Fidelity small cap manager Nitin Bajaj doesn't care much about how the markets are faring or where they are headed. 'I pick stock by stock; it's not based on how markets or the economy is doing,' the Citywire AA-rated manager told Citywire Asia.

'My basic investment strategy consists of picking good businesses that are run by good people and which have reasonable stock valuations,' he said. 'I don't follow hot sectors because historically, if you follow such sectors, you tend to lose money in the long term,' the manager of the Fidelity Asian Smaller Companies fund said.

Bajaj took over the fund in September 2013 and since then, he has reduced the number of stocks from over 200 to 100-150 and tilted away from growth to value stocks.

Here, he highlights five stocks that he believes will perform well in the long term.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Packed for success

One of Bajaj's top stock picks is Greatview Aseptic Packaging, a Hong Kong listed packaging material manufacturer.

'The market is dominated by tetra packs and Greatview is one of the first real challengers to tetra packs. It has a tiny but growing market share in China and can make packaging material that is cheaper than tetra packs,' he said.

'I believe it has a good management team and a long runway for growth. The stock is currently trading at a P/E that is in the low teens, but generates a high return on capital,' he added.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Legal eagle

Another stock pick is Australia-listed legal firm Slater and Gordon Lawyers.

Bajaj noted that the firm, which specialises in personal injury litigation, has a 25% market share in Australia. It also has a significant presence in the UK. 'This business is driven by two factors: the brand and how efficient a company's back-end processes are,' said Bajaj.

'Gordon and Slater have mastered the business model in Australia and are now 'applying the same low-cost model in the UK,' he added.

He said he entered the stock when it was trading in single-digit P/Es, and while the stock has performed very well since then, it still offers reasonable valuations.

'It can grow for several years in single-high digits and generate cash,' he added.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Betting on banks

The TISCO financial group is another stock that Bajaj backs.

'The Thai commercial bank specialising in auto loans was adversely impacted by the government’s first car policy in 2012 which led to higher non-performing loans (NPL). However, the worst seems to be over and going forward there should be benefits from cost efficiencies and slower new NPL formation,' he pointed out.

'Cheap valuations and attractive dividend yield limit the downside while there could be gains once new car sales momentum improves.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

If it's India, it must be IT

The fourth stock pick is an IT company. 'Cognizant Technology is a US-listed company but the majority of its staff is based in India,' Bajaj said.

'It is one of the fastest growing IT services companies globally. This is mainly due to its superior business model, with strength in delivery as well as sales, decent portfolio composition and high quality senior management,' he added.

'Its attrition levels also tend to be low. The company should be able to maintain its margins because of good growth and some flexibility in S,G&A spends as they are currently spending much more than their India listed competitors.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Taking a bet on transport

The fifth stock Bajaj likes is Yuexiu Transport.

'The firm, which owns and operates expressways and bridges in the Guangdong Province and in central and western China, has in the past grown its asset base at a fast pace through acquisitions, but in the process diluted its return on equity (ROE) and increased debt,' Bajaj noted.

'However, the new management aims to lower capex and reduce debt. Once the firm is ex-growth, its toll roads will act as cash generators.

'Also, there are benefits from high organic traffic growth and an increase in one-off disposal gains. Incremental cash generated is paid as dividend. The firm has a 60% dividend payout, which may increase further due to SOE reforms,' he added.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Events
  • Citywire Luxembourg Forum

    Citywire Luxembourg Forum

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2017

    Citywire Italy 2017

  • Citywire Berlin 2017

    Citywire Berlin 2017

  • Citywire Miami 2017

    Citywire Miami 2017

  • Citywire Professional Buyer

    Citywire Professional Buyer

  • Citywire Madrid 2017

    Citywire Madrid 2017

  • Citywire Switzerland Retreat 2017

    Citywire Switzerland Retreat 2017

  • Citywire Amsterdam 2017

    Citywire Amsterdam 2017

  • Citywire Frankfurt 2017

    Citywire Frankfurt 2017

  • Citywire Alternative Ucits Retreat 2017

    Citywire Alternative Ucits Retreat 2017

  • Citywire Paris 2017

    Citywire Paris 2017

  • Citywire Milan 2017

    Citywire Milan 2017

  • Citywire Deutschland 2017

    Citywire Deutschland 2017

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2016

    Citywire Italy 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Alt Ucits 2016

    Citywire Alt Ucits 2016