Mark Hammonds, the fund manager for the Guinness Emerging Markets Equity Income Fund, selected three emerging market stocks
Finding quality companiesdefined as those that have continuously produced returns on capital above their cost of capitalis the foundation of the Guinness Emerging Markets Equity Income Fund's philosophy.
Because of their cash profits, these businesses typically pay dividends that are sustainable. This distinguishes our strategy in emerging market stocks, which frequently exhibit significant volatility.
We steer clear of volatile, cyclical industries and concentrate on companies with steady, reliable financial traits that can withstand shifting market conditions.
Take a look at these three emerging market stocks.
A major supplier to Apple, Largan Precision (Taiwan: 3008) is a Taiwanese company that specializes in the creation and manufacturing of optical plastic lenses. Although the market for smartphones has always been Largan's primary focus, the company has recently been branching out into co-packaged optics (CPO) technology.
In addition to being more energy-efficient and producing less heat than copper wires, CPO is crucial for data transfer between AI chips. Largan is building in-house technical capabilities to produce fiber array units (FAUs), a key component of CPO that may prove to be a critical factor in determining success, by utilizing its current expertise in precision optical lenses.
Largan should be able to sustain its growth rate thanks to the ongoing demand from smartphone manufacturers as well as the momentum behind FAU technology, which is currently undergoing client testing. This is demonstrated by the stock's recent share-price performance, which increased by 44.1 percent (in sterling terms) from the end of May to the end of the year.
One of the biggest Coca-Cola bottlers in Latin America, Arca Continental (Mexico City: AC), has consistently produced profits, rising 22.4 percent (in sterling terms) in the year ending in May. With its pricing power coming from distributing one of the most well-known consumer brands in the world, the brand itself offers a structural moat.
Furthermore, Arca would be unable to match Coca-Cola's level of marketing investment. Geographic diversity throughout the United States, Central America, and South America complements this. Arca has the chance to grow through the consolidation of smaller bottlers in Latin America's fragmented bottling market.
Brazil's only stock exchange is called Brasil Bolsa Balco (So Paulo: B3SA3). It is structurally indispensable in the domestic market since it unifies exchange, clearinghouse, and depository functions under one organization. In Brazil, its systems handle almost all organized trading and over-the-counter securities registration. A buffer against fluctuations in exchange-traded volumes is provided by diversification into data analytics and payments through Trillia, B3's internally established data-analytics division, and the acquisitions of Shipay and CRDC.
In 2025, Brasil Bolsa Balco surpassed India's National Stock Exchange to become the world's largest derivatives exchange by volume, demonstrating its global competitiveness. The long-term investment case is supported by high Ebitda margins, steady returns on capital, and Brazil's expanding retail investor base. As of the end of May, the shares had increased by 33.2 percent in sterling terms.
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