- Maurits Pot, an ex-Goldman analyst and oil trader at Vitol, is the founder and CIO of Dawn Global.
- Inspired by Cathie Wood, he launched an active ETF to capture growth in the fastest-growing region.
- He also shared six high-growth stocks that are expected to generate high-teen returns for years.
Driven by an insatiable hunger for growth, investors have chased everything from SPACs to cryptocurrencies for high returns. But for Maurits Pot, the most profitable opportunities are where few dare to set foot.
Pot — an ex-Goldman Sachs M&A analyst and oil trader at energy giant Vitol — grew up in the UK, studied in the US, and traveled to over 90 countries by the time he turned 31.
During his journeys around the world, Pot discovered a fast-growing region that’s still largely inaccessible to foreign investors — the so-called “Asian cubs,” which include Bangladesh, Indonesia, Pakistan, the Philippines, and Vietnam.
With $860 million young, educated, digitally native, and emerging middle-class populations, these countries are projected by the International Monetary Fund to be the fastest-growing region in the world between 2020 and 2026.
However, due to the limited
and low index inclusion of stocks in these countries, it has been historically difficult for international investors to capture the high return potential in these economies.
“Pre-Covid, I was on the road every month and I’d be going to these markets,” Pot said in an interview. “Ultimately, what I’ve been trained as an active manager means meeting with these companies, speaking with these companies, and engaging with these companies.”
Bucking the trend of index investing
Pot’s decision to take an active, research-focused, and thematic-driven approach to invest in these far-flung frontier markets is also inspired by Cathie Wood, the famed founder and CEO of Ark Invest.
“What we are looking to build is actually not too different from what Cathie has built in the US,” he said. “Obviously, we are focused on different zip codes and slightly different industries, but I think the process and output should be similar.”
Pot is especially against index investing in emerging markets due to the regulatory and maturity risks. He points to the sweeping regulatory crackdown on Chinese tech and education stocks over the past week as an example. Despite regulators’ efforts to calm markets, almost $800 billion in equity value has been wiped out from these stocks.
“China is currently 40% to 45% of the main emerging markets indices. Ironically, you have started to see ex-China indices emerge, yet these indices don’t diversify EM exposure as they primarily just add more Taiwan, Korea, Brazil, India, and also South Africa,” he said. “What’s ironic is that this South Africa exposure is 100% Naspers, which in turn is 95% Tencent, so even the MSCI ex-China indices still have material China exposure.”
Six high-growth stocks to offer high-teen returns for years
Pot expects the major companies in the “Asia cubs” economies to continue growing earnings by more than 20% annually going forward, which translates into “a high teens return” on a two-to-ten-year basis after accounting for foreign exchange and dividends.
He shares six high-growth stocks that exemplify the profit opportunities and lays out their investment merits below.
Renata, which is the leading pharmaceutical player in Bangladesh, has been run by an experienced owner-operator for more than two decades. “It was originally Pfizer Bangladesh before Pfizer transferred the ownership of the subsidiary to the local operating family,” he said. “Outside of Bangladesh operations, it also has a growing global footprint which hedges the FX exposure of its revenue.”
Bank Jago, a digital bank in Indonesia, is the exclusive banking partner for the country’s largest tech group Gojek-Tokopedia. “The two largest brick and mortar banks in Indonesia, with low to no digital presence or capability, have a combined market cap exceeding $100 billion in a country where smartphone penetration exceeds 60%,” Pot said. “Bank Jago has a market cap of about $15 billion.”
Systems, a software company in Pakistan, has 85% of its revenues dollarized, which underscores the size of its international operations in the US, Germany, and United Arab Emirates. It also has a growing software-as-a-service business and has become a top local partner for Microsoft, Adobe, Salesforce, and several other global players, according to Pot.
Converge ICT, a cable and fiber optic player in the Philippines, was previously owned by US private equity giant Warburg Pincus. However, its founding management has been running the business pre- and post-Warburg Pincus and owns a material stake in the business. It has over 50% market share in the home fiber market and a growing market share in the business fiber market. The digitization of the economy is also expected to drive secular demand growth in fiber optic penetration and bandwidth, he said.
FPT is a Vietnamese tech company focused on offering SaaS to small- and medium-sized domestic companies. It also has growing international operations, which are 100% tech-focused. The company is increasingly rolling up local software players and adding vertical software expertise, with a core focus on digital transformation and implementation solutions, he said.
Pot explains that the best companies in Vietnam tend to have a foreign ownership limit set by the government, which means that foreign investors can only buy shares in such companies from other foreign shareholders, in most cases, at material premia of over 40%.
To get around this restriction, Pot’s fund invested in a locally-listed ETF, the Diamond Vietnam ETF, which has exclusive exposure to these restricted companies. He believes that this is a unique differentiating point because many Vietnam-focused ETFs generally invest in unrestricted domestic companies, which usually are state-owned enterprises.
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