Why this multi-billion-dollar money manager believes emerging markets are poised for outperformance

Money manager Rohit Khuller isn’t waiting for a correction to invest in emerging market stocks.

The vice-president of investment management at Montreal-based Letko, Brosseau & Associates Inc. is holding less cash than usual – about 1.5 per cent compared with an average of 3 per cent – to take advantage of what he believes are high-growth stocks in countries such as China, India, Brazil, Mexico and the Philippines.

“You can do a lot better than high single-digit [returns], depending on what companies you invest in,” says Mr. Khuller, who’s also a senior partner at Letko Brosseau. The firm manages about $23-billion in assets, of which around $3.4-billion is invested in emerging markets.

Some of Mr. Khuller’s favourite emerging market stocks today are in sectors such as utilities, financials, industrials and consumer discretionary, based on the long-term growth potential he sees amid rising income levels in emerging market nations.

His $2.7-billion Letko Brosseau Emerging Markets Equity Fund, which was recently made available to retail investors alongside a handful of the firm’s other funds, has returned 29.4 per cent over the past year. Its three- and five-year annualized returns are 19.9 per cent and 14.8 per cent, respectively. Since its inception in February, 2011, the fund has seen an average annualized return of 9.4 per cent. The performance is based on total returns, net of fees, as of May 31.

The Globe spoke with Mr. Khuller recently about emerging markets stocks he’s been buying and selling:

Name three stocks you like today and why.

El Grupo Aeroportuario Centro Norte OMAB-Q, a Mexico-based airport operator, is a stock we started buying on the Mexican Stock Exchange in March, 2019, and continue to buy – most recently a few weeks ago.

The company operates 13 airports in Mexico, including Monterrey, one of the country’s largest cities. The company also manages hotels and industrial parks. In 2025, it processed 29 million passengers through its airports, an 8.5 per cent increase over the year prior.

We see long-term growth drivers for this stock, given that the flying penetration rate in Mexico is estimated at about 15 per cent, which is low. Over time, as personal incomes grow, people will not only fly more but also spend more at airport restaurants, duty-free shopping, car rentals, VIP lounges and hotels.

We expect the company’s earnings and cash flow to grow by between 12 and 15 per cent a year for the next three to five years. The stock is also relatively inexpensive, trading at 12 times next year’s price-earnings (P/E) ratio. It also has a 6-per-cent dividend yield.

HDFC Bank Ltd. HDB-N, an India-based banking and financial services company based in Mumbai, is a stock we started buying in April, 2024, and continued to buy as recently as a couple of weeks ago. HDFC is India’s largest private-sector bank by assets and market capitalization. It’s also one of the world’s largest banks, with more than 100 million customers. It also has almost 10,000 branches and 21,000 ATMs across more than 4,100 cities and towns in India.

The bank has one of the lowest cost structures in the emerging markets banking space and one of the best asset-quality books. We like this stock because the long-term growth drivers for a business like this come from the country’s younger demographic. India has a median age of around 28 years. Also, its credit-to-GDP ratio is about 60 per cent, which is low.

The company is taking market share from state-owned banks because it delivers better customer service, including better technologies. The stock trades at 12.4 times next year’s P/E, which is reasonable given that its earnings are expected to see a 13 per cent CAGR [compound annual growth rate] over the next three years. It also pays a 2 per cent dividend yield.

NHPC Ltd., India’s largest hydro plant owner, developer and operator – which trades on India’s National Stock Exchange and the Bombay Stock Exchange – is a stock we started buying in February this year.

NHPC operates 8,500 megawatts (MW) of hydroelectric generating capacity, which accounts for 16 per cent of India’s total hydroelectric capacity. Electricity produced by hydro plants is generally among the most competitive, lowest-cost and environmentally friendly, which we think will help drive NHPC’s long-term growth.

The company is currently constructing 10 hydro plants with a gross capacity of 8,000 MW, which is expected to more than double its earnings over the next five to six years. The stock trades at a reasonable valuation of 12.5x next year’s P/E. It also pays a 3.1-per-cent dividend yield.

Name a stock you’ve sold or trimmed recently

Kingboard Laminates Holdings Ltd. KGBLF, the world’s largest manufacturer of laminates used in the printed circuit board industry, is a stock we trimmed by about 80 per cent, based on valuation, in the past couple of months.

We started buying the stock in 2011 on the Hong Kong Exchange. Our annualized return has been about 33 per cent since we owned it. We still like the company and own a sizeable chunk given how much it has grown. Kingboard is one of the world’s lowest-cost producers of laminates. It has a 14-per-cent market share, up from 7 per cent when we first started buying it.

Right now, we’re going through a period in which demand for electronic boxes is much higher than capacity because of growth in AI. As a result, the multiple has grown to more than 40 times P/E, up from about 8 to 10 times when we first bought it. As a result, we’ve been taking profits. We believe we’ll be able to buy this stock again at a much lower multiple once demand for these boxes normalizes.

This interview has been edited and condensed.