By Christiana Sciaudone
Investing.com -- The U.S.-China trade war doesn't much scare off Danton Goei. The portfolio manager for the Davis Funds sees Chinese consumer companies growing regardless of tariffs as the population urbanizes.
And that's why they are among the top holdings of the exchange-traded funds Davis Select Worldwide (NASDAQ:DWLD) and Davis Select International (NASDAQ:DINT), Goei said in an ETF Think Tank webinar on Oct. 27 with Dan Weiskopf, lead ETF strategist at the organization.
"Today we think there is a huge opportunity in part because of the U.S.-China tension," Goei said, citing the dramatic drop in shares for companies like Alibaba (NYSE:BABA) and New Oriental Education & Technology (NYSE:EDU) in late 2018, when the war started.
Chinese consumer companies are expected to benefit from a population that is increasingly moving to cities and becoming consumer spenders, Goei said. The ETFs are limited to about 30 companies versus, say, the almost 3,000 in the MSCI ACWI Index.
"We don't think there are 3,000 great or even good companies out there," Goei said. "Focusing on 20 or 30 of these great businesses is the way to go for the long term."
DINT, with $238 million of assets, is up 8% for the year, while DWLD, with $287 million assets, rose more than 4%. Both, however, have recovered more than 58% since slipping in March along with the rest of the market.
As of Sept. 30, Alibaba, New Oriental and JD (NASDAQ:JD).com are among the top three holdings for both DWLD and DINT, the former of which is global and the latter of which is global ex-U.S., according to data from the Davis website.
New Oriental Education & Technology "is a leader in after-school tutoring," Goei said. In Chinese culture, education is very important, and the country is becoming more of a value-added economy with the number of students currently using after-school services at 30% versus neighbor North Korea, which is closer to 80% and 90%. They have invested deeply in online learning -- before the pandemic -- and they pay teachers 20% higher than others, attracting the best, Goei said.
"They have a huge competitive advantage, they're taking share every year," he said.
Alibaba's another big bet, one that Davis bought into at the initial public offering and has added ownership since.
Setting 2020 aside, Goei travels every summer to Asia or Europe, and spends a lot of time with the companies he invests in. He likes financials in well-run countries like Norway, as well as Applied Materials (NASDAQ:AMAT) as its semiconductor bet. But China's truly where his attention seems set.
The "middle class consumer companies have so little to do with tariffs," Goei said.