Reputable businesses in emerging markets with steady profits

Three emerging market stocks are chosen by Mark Hammonds, portfolio manager at Guinness Global Investors, to invest in

Our strategy is to concentrate on quality businesses, which are those that have consistently outperformed their cost of capital over time. These businesses frequently distribute dividends as a result of their financial success. When viewed in this light, the dividend is essentially an outcomea gauge of the business's economic productivityand as such, we think it is more likely to be long-term viable.

This strategy is unique in emerging markets because it directs us toward businesses with the more steady, stable financial qualities we are looking for rather than the commodities roller coaster and the cyclical industries that go along with it.

Here are three stocks from emerging markets.

One of the businesses we own that has access to hardware utilized in the AI supply chain is Elite Material (Taipei: 2383). The company is the top manufacturer of halogen-free copper clad laminate materials for printed circuit boards, which are used in consumer electronics, cloud computing, and IT infrastructure.

The company's capacity to adjust to the shifting information technology demand cycle over the last five years has been a major draw for this long-held position. The company has benefited from these fluctuating demand peaks and the current surge in spending on AI servers because it has a dominant position in a product that can be used in a variety of applications. The share price has more than doubled so far this year, reflecting the recent excitement in the AI stock market. The company's 2026 earnings forecast is just over 23 times what it is trading on.

The largest dairy company in China, Yili (Shanghai:600887), manufactures dairy products like yoghurt and cheese, milk powder, and fresh and Ultra High Temperature milk, which accounts for about two-thirds of revenue. Although China's dairy market has faced structural difficulties recently, there are indications that the supply-demand balance is beginning to improve, which should eventually result in a recovery in milk prices.

We anticipate that as consumer spending rises, dairy consumption will eventually rise from its current relatively low levels, especially when compared to developed markets. At the same time, the company has some pricing power due to its dominant position in several categories and price points. These two elements are the dual forces that ought to produce a powerful tailwind. Scale has significant distribution benefits as well. The trailing dividend yield is 4.5 percent, and the company trades on 16 times projected earnings. It is anticipated that earnings will increase by 10% the following year.

Brazilian consumer pharmaceuticals company Hypera (So Paulo: HYPE3) has amassed a portfolio of industry-leading brands in a variety of categories, including pain management, flu treatments, and digestive health. Dermatology and vitamin supplements are also part of the product line.

The company recently started a program to cut back on excess working capital, which is now mostly finished. We think the company's valuation is very reasonable given the underlying quality offered, even though the business is somewhat seasonal due to the prevalence of cold and flu medications in the company's product range. On a trailing basis, the stock yields 4.7 percent and is trading at 14 times the projected earnings.

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