The Motley Fool

3 Emerging market contrarian plays: HSBC Holdings plc, Aberdeen Asset Management plc and Ocean Wilsons Holdings Limited

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Contrarian investing is one of the simplest strategies for investors to adopt. However, trying to do the opposite of what your instincts tell you can sometimes be a bridge too far, despite the fact that buying what others are selling can work out surprisingly well.

Going against the grain

Indeed, a recent case in point this year is investors who were brave enough to buy the out-of-favour commodity and oil and gas stocks and have seen spectacular gains year-to-date.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

For many years, value investors have sought to buy stocks on low PER while selling those that have rerated and trade on higher valuations and they’ve found it a winning strategy.

The contrarian meanwhile seeks out stocks that are typically cheap, and/or out of favour and facing headwinds – be that political, economic, or simply commercial. However, investors should be cautious when the prospects for a business aren’t especially rosy and need to look for signs of improvement as things can often get worse before they get better.

Three companies for the brave

As can be seen from the six-month chart, all three companies under review have disappointed to varying degrees, but is this down to a broken business or simply market negativity? Let’s take a closer look.

Starting with the biggest loser Aberdeen Asset Management (LSE: ADN), a company that has been under pressure for some time due to the negativity towards emerging markets. Management reported the interim results to March 2016 on Tuesday. They were characterised by a backdrop of ongoing fragile investor sentiment towards emerging markets, with the cyclical slowdown exacerbated by the effects of falling oil and commodity prices.

Despite the negativity, management decided to hold the interim dividend at 7.5p, and in the outlook noted tentative signs of optimism from investors who buy into the company’s long-term value-based equity investment process.

Following the share price fall, the forecast PER is a little over 13 times earnings with an expected yield of over 7% for the full year, which should be covered by earnings – just.

Another emerging market player in the doldrums is blue-chip bank HSBC (LSE: HSBA). It’s hardly surprising therefore that the shares are off by around 30% over the last 12 months. It seems that the market was braced for the 18% fall in adjusted profit before tax, only sending the shares down by a few percentage points.

There was also welcome relief for income investors with the dividend held and expected to be more than covered by earnings.

Indeed, like Aberdeen, the dividend yield has risen to over 7%, and with a single-digit forecast PER and a price-to-book value of less than 1, these shares are looking cheap on a number of metrics.

Last up is lesser-known Ocean Wilsons Holdings Limited (LSE: OCN), an investment holding company which, through its subsidiaries, is engaged in the provision of maritime and logistics services in Brazil. Its segments include maritime services and investments.

The shares have been on a bit of a run recently as the market reacted positively to what the chairman described as a strong performance in a challenging market.

As with HSBC, the shares trade on a single-digit forecast PER and yield over 5%, and as with all the shares here, investors could see a rerating should emerging markets turn a corner.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.