Though America’s technological prowess is still unmatched, money managers are going to Asia to find high-reward opportunities—a chance, they say, to buy the equivalent of a Google (GOOGL) or an Amazon (AMZN) 20 years ago. “It’s the first time that emerging markets is really having a rally that is not about commodities as much as it is about tech,” says Patrik Schöwitz, global strategist of multi-asset solutions for J.P. Morgan Asset Management. Some investors think it’s the cusp of a “supercycle” of expansion that for once doesn’t end with a plunge in copper or corn prices.
In fact, some emerging-market tech companies are giving the U.S. blue chips a run for their money. In China, Amazon has nothing on the incumbent, Alibaba (BABA), which is on track to grow sales 35% in the next fiscal year after a 60% rise this year (the latter is twice as fast as Alphabet’s growth). Larry Puglia, manager of the T. Rowe Price Blue Chip Growth Fund, owns Alibaba along with Chinese Internet company Tencent (TCEHY), which is also capitalizing on mobile payments. Both trade at cheaper valuations than Amazon. “Smartphone technology has revolutionized mobile payments,” says Katie Koch, global head of client portfolio management and business strategy for fundamental equity at Goldman Sachs Asset Management. “And this is an area where emerging markets are going to lead the U.S.”
Rather than own Apple (AAPL), Ian Mortimer, comanager of the Guinness Atkinson Global Innovators Fund, owns two of its major suppliers: Taiwan-based Catcher Technology, which makes glass casings for iPhones, and Hong Kong’s AAC Technologies, the maker of so-called haptics, which create button-clicking sensations and other vibrations. Both companies have operating margins greater than 25%—higher than Apple’s—and have much lower P/E ratios: Catcher, for one, trades at just nine times 2018 estimated earnings. And even if the iPhone X fails to be a hit, the suppliers have plenty of other quickly growing customers in Asia, including smartphone maker Huawei.
Neither of those stocks trade on U.S. markets, but one of Mortimer’s picks that’s easier for Americans to buy is New Oriental Education and Technology Group (EDU). It’s the largest Chinese provider of private tutoring and coursework—both in-school and virtual—and it trades on the New York Stock Exchange.
A version of this article appears in the Dec. 15, 2017 issue of Fortune, as part of the article “Investor’s Guide 2018 — Stocks and Funds: The All-Tech Portfolio.”
