This article is part of the Morningstar's Guide to Emerging Market Investing. Click here to find out just what an emerging market is and which hold the potential to grow exponentially - boosting your investment portfolio.
Emma Wall: Hello and welcome to the Morningstar series 'Why Should I Invest with You?' I am Emma Wall and here with me today is Jeroen Huysinga, Manager of the JPMorgan Overseas Investment Trust (JMO). Hello Jeroen.
Jeroen Huysinga: Good morning Emma.
Wall: So your Trust is a really good example of why investors don’t necessarily have to choose emerging market equities in order to get exposure to this great growing emerging market story, isn’t it. I mean how many exactly emerging equities do you have in the Trust?
Huysinga: You are absolutely right. I can pick from a universe of over 2,000 stocks. I hold around 80 stocks in the portfolio. Eight of those are direct emerging markets stocks, but I reckon around 35 have indirect but significant emerging market exposure.
Wall: Having said that investors don’t realise in the FTSE itself 70% of the revenues in FTSE 100 come from overseas, a big proportion of those come from the wider emerging markets. It means that you can get the corporate governance and the stability and the shareholder governance that you expect from a developed market equity, but with the growth from emerging markets.
Huysinga: You are absolutely right and I find that very reassuring, but more importantly for me because valuation is a vital prerequisite. Is that many of the names I see in developed markets are relatively cheap.
Wall: And have you got a couple of stock examples for us.
Huysinga: Absolutely, I have got loads. Henkel (HEN), they reported earlier this week it's a German company. They have activities across various industries, but in particular adhesives, where they are fast consolidating a very interesting global market. 45% of Henkel is emerging markets, earlier this week they announced growth of 6.5% revenues in emerging markets. Now that is way above what you would get in developed markets particularly in Europe.
Wall: And what about another one perhaps from the U.S.
Huysinga: In the U.S. there are a couple of names Paccar (PCAR) which is a truck company. They are active in Europe and the U.S., but they are just opening up a factory in Brazil. It's not necessarily the right time to be doing so. But we determine our valuation signals very much in what we believe is achievable normalized and certainly that new factory in Brazil will make a very important contribution to Paccar in the normalised year.
Even Japanese companies Daikin (6367) for example, which is a world leading air conditioning company. 30% of their exposure is in China. It's growing at 15% plus, margins exceed those of the Group average and as you said I have a meeting or my colleagues have a meeting with Daikin on a quarterly basis. We talk about the financials. We are confident about the discipline of the investment they are making and that’s all really good and it's cheap.
Wall: Jeroen, thank you very much. This is Emma Wall from Morningstar. Thank you for watching.
