Taking a macro or global view on stocks can be educational and offer a different view on the economy. Alpha Ba, portfolio manager specializing in global and emerging markets equities with Pillow Investments, gives us his three global stock picks.
The three stock picks, which you can learn more about in the video above, offer diversification, covering technology, automotive and financial markets.
Taiwan Semiconductor Manufacturing Co Ltd. (NYSE:TSM)
Ba likes Taiwan Semiconductor, which is highly capital intensive. So it invests about US$30 billion a year in capital expenditures, Ba says.
“They do that to manufacture smaller and smaller chips, what we call advanced geometry chips,” he says. “And they do that for the likes of NVIDIA, for the hyperscalers like Microsoft, you know, Amazon, Apple, Meta, Tesla.”
TSM is up almost 250 per cent in five years and this year, shares have risen more than 70 per cent.
TSMC shares were last trading at US$194.87.
Ferrari NV (NYSE:RACE)
Ba’s No. 2 is Ferrari saying that, “if you cannot afford the car, at least on the stock, it’s attainable.”
Ferrari is at a EUR$87 billion market cap and its brand management and exclusivity are all major plus marks for the luxury car maker. Ba points out that the company has some of the highest margins of any auto manufacturer in the world, and he thinks it can get as high as 40 per cent. His numbers show that every dollar in sales generates 20 cents free cash flow.
His estimate is around 9-10 per cent revenue growth in the next couple of years with earnings pre share growth in the double digits.
He also points to the customization features, starting at EUR$100K to pick a different colour for a vehicle, makes the selling price much higher than the base price, increasing margins.
Ferrari shares were last trading at US$476.59.
MercadoLibre Inc. (NDAQ:MELI)
Ba calls MercadoLibre a blend between Amazon and Paypal in the Latin America online commerce sector. Sales are distributed between Brazil (45 per cent), Argentina (25 per cent) and Mexico.
It has added a credit business, Mercado Credito, for personal loans, online payments. “They’re increasingly taking share on the credit card business,” Ba says.
He points out MercadoLibre has a credit analytics system that “the Bank of International Settlement has said is much more powerful than the traditional banks have in terms of analyzing default rates.”
On the e-commerce front, Latin America’s penetration is still low compared with markets such as China and the United States, suggesting significant growth potential. Revenues are anticipated to double over the next three to five years, with earnings per share growth projected at 40-50 per cent.
Ba says that although the stock is considered expensive, its return on equity is expected to expand, justifying a higher valuation. Additionally, MercadoLibre faces fewer geopolitical risks compared with other stocks, which is another point that makes it an attractive investment opportunity for Ba.
MercadoLibre shares were last trading at US$2,051.52.
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