Leon Eidelman, whose $7.4 billion JPMorgan (NYSE:JPM) Emerging Markets Equity Fund has trounced 96% of peers through five years, said the firm forecasts 18% annualized returns for a basket of some 1,200 developing-nation stocks over the next half decade. The JPMorgan model jumped to an all-time high last month. He says his fund, which has about half its money in China and India, will do even better.
About 19% of Eidelman’s portfolio is invested in four Asian technology firms: Alibaba (NYSE:BABA) Group Holding Ltd., Tencent Holdings Ltd., Taiwan Semiconductor Manufacturing Co. and Samsung Electronics (KS:005930) Co., according to the latest filings compiled by Bloomberg. That’s still slightly less than their weighting on the benchmark MSCI EM Index.
“Our view is that over the next five years these businesses will emerge even bigger,” New York-based Eidelman said in an interview.
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His fund, which is down 18% this year but is still beating three-quarters of peers, has dodged the chaos in crude markets by avoiding oil stocks. Eidelman said he prefers technology-focused firms including Shanghai-based pharmaceutical WuXi Biologics Cayman Inc. as well as online shopping platform Meituan Dianping in Beijing and the e-commerce company MercadoLibre (NASDAQ:MELI) Inc. in Buenos Aires.
Estimated earnings per share for MSCI Emerging Markets Index members in the next 12 months have been cut by 17% since the start of the year, according to Bloomberg-compiled data.
The JPMorgan fund manager is among a chorus of investors and strategists including GMO LLC, Research Affiliates LLC and Natixis Investment Managers LP touting value in emerging-market equities after the benchmark’s worst quarter since the 2008 financial crisis. Eidelman’s optimism is buoyed by his forecasts for earnings growth, dividends and currency performance as well as the cheap valuations of many developing-nation stocks.
He said the world’s top two economies, the U.S. and China, are best equipped to quickly recover from the coronavirus — the U.S. because the dollar is the global reserve currency and China because authorities have been able to impose shutdowns without the political squabbling of other nations.
“I think both places are better off than the rest of the world,” he said.
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