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Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer.

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Sean Aylmer: We're certainly not an investing podcast, but we do enjoy

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Sean Aylmer: talking to professional investors about what they like and what

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Sean Aylmer: they look for when examining companies. It's particularly interesting as

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Sean Aylmer: we get towards reporting season here. Of course, we're in

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Sean Aylmer: the middle of reporting season on Wall Street.  Finding out

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Sean Aylmer: just how companies have performed and more importantly, what lies ahead. Remember,

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Sean Aylmer: this is general information only and you should seek professional

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Sean Aylmer: advice before making any investment decisions. Brian Han is the

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Sean Aylmer: Director of Equities Research Australia, New Zealand at Morningstar. Brian,

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Sean Aylmer: welcome back to Fear & Greed.

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Brian Han: Hi, Sean. It's a pleasure to be here.

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Sean Aylmer: Now  I  do  like  the  Morningstar  Best  Ideas  publication,  comes 

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Sean Aylmer: out  monthly.  Just  explain  what  it  is.

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Brian Han: Oh, sure. It is a report that we publish every

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Brian Han: month highlighting what our Morningstar analysts see as the most

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Brian Han: worthwhile stocks for investors to consider. So you won't see

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Brian Han: any stocks on this list that happen to be the

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Brian Han: flavours of the month. You won't see this list littered

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Brian Han: with stocks in sectors that are suffering from cyclical issues.

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Brian Han: And you certainly won't see any penny dreadful stocks on

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Brian Han: this list that day traders and even some managers like

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Brian Han: to have a punt on. What you will see are

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Brian Han: a select number of stocks drawn from across the whole

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Brian Han: spectrum of the market that have passed some quality screens

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Brian Han: and are trading at decent discounts to our valuations. And

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Brian Han: we do these Best Ideas not just for Australia and New Zealand,

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Brian Han: but also for Americas, Europe and Asia.

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Sean Aylmer: Okay,  so  with  that  as  background,  let's  jump  into  it 

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Sean Aylmer: and  let's  start  with  Australia  before  we  move  on  to 

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Sean Aylmer: other  parts  of  the  globe.  It's  a  dynamic  list,  isn't 

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Sean Aylmer: it?  So  companies  come  on  and  off.  And  I  know 

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Sean Aylmer: in  the  last  week  or  two  there's  been  a  couple 

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Sean Aylmer: of  companies  that  have  fallen  off  the  list.  Just  who 

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Sean Aylmer: were  they  and  why?

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Brian Han: So  yes,  that  is  correct,  Sean.  Last  week  we  removed 

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Brian Han: WiseTech,  which  is  a  transport  logistics  software  company  and  AGL. 

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Brian Han: Both  have  been  removed  simply  due  to  their  strong  stock 

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Brian Han: price  performance,  so  much  so  that  they  are  no  longer 

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Brian Han: trading  at  a  sufficient  discount  to  our  analyst  valuations.  But 

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Brian Han: there  will  be  other  reasons  why  certain  stocks  would  be 

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Brian Han: removed  in  certain  months,  and  that  would  be  perhaps  because 

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Brian Han: the  fundamentals  have  changed  or  some  industry  events  have  happened.


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Brian Han: So,  as  you  say,  Sean,  it  is  a  dynamic  list 

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Brian Han: that  we  update  and  reassess  every  month.

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Sean Aylmer: Okay.  So  AGL and WiseTech  fell  off  last  week.  Did  anything  join? 

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Sean Aylmer: Have  you  been  buying  anything?

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Brian Han: Yes, we added two companies. One is ASX. I don't

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Brian Han: need to say too much about that. It's essentially a

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Brian Han: natural monopoly providing essential infrastructure to Australia's capital markets, and

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Brian Han: it is trading at a decent discount to our analyst's evaluation.

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Brian Han: The second one we added is quite interesting. It's a

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Brian Han: company called ResMed. It is a leading sleep apnea treatment company.

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Brian Han: It's performing quite strongly. There is excess demand for ResMed's

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Brian Han: products due to some supply shortages that we're having, and

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Brian Han: also due to a competitor who's having some internal issues. Now,

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Brian Han: you add to that the fact that we have aging population,

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Brian Han: obesity and under diagnosis of sleep apnea, I think these

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Brian Han: are all long-term trends which should support continuing demand for

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Brian Han: ResMed's products.

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Sean Aylmer: Okay,  so  that's  Australia.  Let's  look  beyond  Australia,  and  we'll 

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Sean Aylmer: start  with  the  biggest  market,  which  of  course  is  Wall 

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Sean Aylmer: Street.  Tell  me  about  Teradyne.

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Brian Han: Yeah, let me give you some background, Sean, because a

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Brian Han: constant frustration for Aussie investors is the lack of quality

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Brian Han: tech stocks on the ASX. Now, there are plenty of

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Brian Han: penny dreadfuls masquerading as such, but not many solid franchises. Well,

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Brian Han: there are a few in the US trading at decent

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Brian Han: discounts to our valuation, and one, as you say, is Teradyne,

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Brian Han: listed on NASDAQ under ticker symbol TER. It is basically

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Brian Han: a chip testing company, which invests a boatload of money

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Brian Han: into producing high quality automated testing equipment, and it's highly

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Brian Han: leveraged to this whole industrial automation trend. It has a

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Brian Han: leading market share and superior products, profitability and customer relationships

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Brian Han: than peers. So that is one. And perhaps if I

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Brian Han: can give you another one, Sean, that would be Cognizant Technology,

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Brian Han: and that's also listed on the NASDAQ under CTSH. Now,

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Brian Han: it is not just a small, dime a dozen mom

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Brian Han: and pop IT service provider, but a major player that

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Brian Han: makes a lot of money facilitating all the digital transformation

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Brian Han: work that's going on in companies around the world.

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Sean Aylmer: It's  interesting,  both  as  companies,  Cognizant  Technology  and  Teradyne,  they 

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Sean Aylmer: are  service  providers  to  what's  happening  in  the  technology  world. 

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Sean Aylmer: There's  opportunities  not  just  about  the  NVIDIAs  of  the  world, 

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Sean Aylmer: it's  actually  the  service  providers  to  those  companies.

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Brian Han: Yeah, Sean, it's like the old days when the gold

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Brian Han: rush was on, and you can go on get the gold,

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Brian Han: or you can buy actually shares in businesses that sell

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Brian Han: the shovels and the picks. And these are the companies

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Brian Han: that sell their services to, as you say, facilitate not

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Brian Han: just things in technology world, but in the real world

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Brian Han: such as automation and digitisation and transformation, which have become

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Brian Han: the buzzwords ever since we had that pandemic.

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Sean Aylmer: Stay  with  me,  Brian,  we'll  be  back  in  a  minute.


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Sean Aylmer: I'm speaking to Brian Han, Director of Equities Research Australia,

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Sean Aylmer: New Zealand at Morningstar. So let's shift to Europe. That

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Sean Aylmer: economy isn't traveling as well necessarily as the US economy,

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Sean Aylmer: nor the Australian economy for that matter, but you've picked

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Sean Aylmer: out Accor, the hotels group, Anheuser-Busch. Tell me about Accor

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Sean Aylmer: and Anheuser-Busch.

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Brian Han: I guess that's one of the reasons why we wanted

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Brian Han: to highlight these best ideas because as you say, Sean,

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Brian Han: not many people know that there is a company called

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Brian Han: Accor and that it is one of the largest hotel

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Brian Han: groups in the world. And it is leveraged to that

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Brian Han: whole post pandemic recovery in global travel activities. Now, it

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Brian Han: has brands catering to all segments of the market from

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Brian Han: Raffles and Sofitel for rich people like yourself, Sean.

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Sean Aylmer: Yes, yes, yes.  Talking  my  language  here,  Brian.

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Brian Han: To  Ibis.  To Ibis and BreakFree catering  to  cheapskates  such  as  myself.

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Sean Aylmer: I  think  you've  got  that  confused  somewhat.  I  think  you've 

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Sean Aylmer: got  the  names  mixed  up  there,  Brian,  but  go  on.

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Brian Han: Yeah, but the interesting thing is the shares are still

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Brian Han: undervalued relative to what our analysts thinks they're worth. But another one,

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Brian Han: as you say, is Anheuser-Busch InBev, which is listed on

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Brian Han: the Brussels exchange. And it makes 500 different kinds of

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Brian Han: beer brands, including Corona, Budweiser, and Heineken. And the company

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Brian Han: has dominant market positions and much lower cost structures than peers,

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Brian Han: and especially leveraged to big, developing markets such as Africa

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Brian Han: and Latin America.

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Sean Aylmer: Okay.  Now,  we  often  talk  about  Wall  Street,  we  sometimes 

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Sean Aylmer: talk  about  Europe,  here  on  Fear &  Greed  we  don't  actually 

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Sean Aylmer: talk  a  lot  about  the  companies  to  invest  in  Asia, 

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Sean Aylmer: but  it's  such  a  big  part  of  our  market,  and 

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Sean Aylmer: China  specifically.  Couple  of  examples  there  that  you  think  investors, 

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Sean Aylmer: it's  worth  having  a  look  at,  China  Merchants  Bank  and 

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Sean Aylmer: then  China  Overseas  Land &  Investment.

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Brian Han: Yeah, exactly. And it's funny you should mention that because

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Brian Han: Asia is full of developing countries with huge populations and

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Brian Han: growing wealth. So if you can find shares in companies

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Brian Han: that serve these markets and can buy them at a

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Brian Han: discount to what they may be worth intrinsically, why wouldn't

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Brian Han: you consider them? And the two that you mentioned, one

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Brian Han: would be China Merchants Bank. It has a leading market

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Brian Han: position in the Chinese retail banking space and is also

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Brian Han: making big inroads into wealth management. The bank has a

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Brian Han: industry-leading return on equity because it has such a asset

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Brian Han: light business model. It has a very well-off customer base,

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Brian Han: prudent lending practices, and pretty low funding costs. And at

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Brian Han: the current discount to our analyst valuation, I think is

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Brian Han: certainly worth a look for Aussie investors who may be

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Brian Han: filled to  the gills with our four major banks. And the

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Brian Han: other one you mentioned was the China Overseas Land & Investment. Now,

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Brian Han: this real estate company operates in the very competitive and

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Brian Han: fragmented Chinese property development space, but it has been one

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Brian Han: of the few to achieve market share growth in recent periods.

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Brian Han: And they have done this by focusing on land bank

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Brian Han: quality upgrades and acquisitions. And it mainly operates in wealthier

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Brian Han: cities in China, so it should do well as home

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Brian Han: buyer sentiment in China continues to recover.

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Sean Aylmer: Brian,  plenty  to  think  about  in  all  that.  Thank  you 

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Sean Aylmer: very  much  for  talking  to  Fear &  Greed.

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Brian Han: Pleasure,  Sean.  Thank  you.

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Sean Aylmer: That  was  Brian  Han,  Director  of  Equities  Research  Australia,  New 

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Sean Aylmer: Zealand  at  Morningstar.
 This  is  the  Fear &  Greed  Business  Interview. 

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Sean Aylmer: Remember,  you  should  get  professional  advice  before  making  any  investment 

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Sean Aylmer: decisions.  Join  us  every  morning  for  the  full  episode  of 

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Sean Aylmer: Fear &  Greed,  Australia's  most  popular  business  podcast.  I'm  Sean  Aylmer, 

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Sean Aylmer: enjoy  your  day.