Ching Jen (James) Kan & team
Deutsche Bank
Newcomer Ching Jen (James) Kan leads Deutsche Bank to its first appearance on the roster since 2005 and its highest rank — No. 2 — to date in the sector, which is expanded from Metals & Mining to reflect the comprehensive approach that many firms are taking. The 13 team members follow 109 companies, and according to one buy-side backer, “their views are not affected by short-term market volatility.” Picking the right stocks is tricky these days, Kan observes. “A secular headwind combined with a cyclical tailwind makes it a very challenging sector to follow,” he says. “We believe positive returns are possible but that short-lived destocking and restocking cycles of various commodities need to be tracked very carefully.” The Hong Kong–based troupe’s top picks include Anhui Conch Cement Co. and Angang Steel Co., both of which are headquartered in China. “We’ve seen strong property sales in China, and in this environment building materials should perform well,” the crew chief explains. “Anhui Conch’s cost competitiveness, leading position as a consolidator and high free cash flow yield make it a top pick.” As for Angang, “although the market is generally bearish about the steel sector, its valuation looks low to us, and we view a rebound as likely,” Kan says. “The steel industry should in the end be a beneficiary of government plans for reform, because we expect them to result in consolidation and capacity rationalization.” — Pam Baker