Many people are under the misconception that Asian Listed Companies are some sort of a ‘safe bet’ in terms of stocks. Some even go as far as saying that they are ‘platonic’ investments. Well, let’s disabuse them of that notion. As an investor, it is your duty to educate yourself about any investment vehicle and try to understand its pros and cons. This article will discuss the most profitable and efficient way of investing in Asia, which I have termed the ‘Asian List Betting Strategy’. It is an extremely effective way of generating consistent alpha over the long term.
What Makes An Asian Company Special?
An Asian company may not always be the most exciting company to research. Many of them are very staid and bureaucratic, which can make following their management teams and assessing their performance very dull. That’s not to say that there aren’t any gems amongst them – far from it – but you need to look for them. One way of doing that is through studying the company’s financial statements and analyzing the ratios associated with it. More often than not, you’ll find that these ratios provide a good indicator of a company’s health and its long-term prospects. The following table provides a good overview of the finance ratios that you should be looking out for:
As you can see, these companies have all been in the news at one point or another for all the wrong reasons. It would be a good idea to steer clear of these kinds of investments if you’re looking for the safe route.
Strong Balance Sheets
The first thing you’ll notice about the companies included in the Asian list is that they all have relatively strong balance sheets. This is evidenced by the fact that their total liabilities are less than their total assets. Let’s say you wanted to create a portfolio consisting solely of companies with relatively strong balance sheets. You can invest in these stocks through an Investment Account with a bank or brokerage firm. Doing so will not only protect you from the downside but also provide you with the opportunity to ride the upward trend should it emerge. Another plus point of this kind of investment is that you may be able to borrow money to invest in some of these companies, which would otherwise be out of the question for the average individual or small-sized business.
Mature Businesses
Another thing that sets these companies apart is that they’re all very well established. Many of them have been in business for decades now and have weathered the economic storms that Asia has seen over the years (and some of them were even founded by legendary entrepreneurs who made their names in the region). You don’t always find this in well-known brand names that are traded on major stock exchanges around the world.
So, if you’re looking for a simple and efficient way of making money, you can’t go wrong with these stocks. They’re relatively risk-free and generate good cash flows, which can be recycled to fund further investment.
Attracting Foreign Investment
As investors, we all want to find the next big stock tip. One way of doing that is by studying the business’s management team and understanding their strategy. Many of these companies have implemented a foreign investment policy and are aggressively seeking to attract outside money to grow their businesses and become even more successful. You can bet that many of these companies will continue on this path of growth, as existing shareholders want to keep the good times flowing.
So, if you’re looking for the next big investment opportunity, you can’t go wrong with these companies. Not only do they offer the opportunity for capital appreciation but also present the possibility for lucrative dividends.
Which Stocks To Watch?
Nowadays, a stock can be included in the Asian list for a variety of reasons. Some of the companies are quite popular in their home market while others are merely famous in certain circles. Inclusion in the list certainly doesn’t denote extraordinary performance as there are hundreds of other stocks that could take its place.
Take a look at the three stocks discussed below. Each of them is interesting in its own right but also represents a potential good investment opportunity:
- Asea BJH (ASRJY): This is a pure-play on the booming Chinese market. The company makes and sells kitchen appliances. It’s a fairly big company but, nevertheless, still considered a micro-cap stock. That means that it is heavily traded (and some would even say over-watched) on the secondary market. Nevertheless, if you’ve ever considered investing in China, this is a good stock to look into.
- Shanghai Semiconductor Industry Co. Ltd (SSMC): Like Asea BJH, this is a pure-play on the Chinese market. It is also one of the largest manufacturers of semiconductors in China. That means that it can command a very high price-tag when it wants to buy a stock. When it comes to investing in China, you’ll often hear about this company. Not only does it offer the opportunity for profit but it is also the subject of many of the country’s highest-profile business stories. If you’ve ever considered investing in China, this is a good stock to look into.
- Totoyamo Ltd (TOYO): This is a holding company which owns and operates toy stores throughout Japan. That’s not all it does, though. It also invests in real estate and has a large number of retail outlets. So, if you’re looking for a safe and steady investment opportunity with a store-based business model, you can’t go wrong with this one.
Each one of these companies is a good opportunity for investment but it’s also up to you to decide if they’re right for you.