Chit Chat Stocks – “The Best Asian Stock You Can Buy Today? (Hidden Value)”

Date: October 22, 2025
Host(s): Ryan Henderson, Brett Schafer
Guest: Michael Fritzel (Author of Asian Century Stocks)

Episode Overview

This episode explores the investment landscape in Asia, featuring a deep dive into Fairfax India—a publicly traded investment vehicle holding significant assets in India's growth story, most notably the Bangalore International Airport. Hosts Ryan and Brett are joined by Michael Fritzel, who specializes in Asian value stocks, for a discussion encompassing the opportunities and risks in Asian markets, the nuances of Fairfax India’s business, and broader strategy for finding hidden value in the region.

About the Guest & His Approach

Michael Fritzel - Asian Century Stocks

• Background: European by origin, extensive Asian experience (lived and worked in the UK, India, China, Singapore; roles at Macquarie Bank, family office, hedge/mutual funds)
• Newsletter: Focuses on undercovered, undervalued blue chips in Asia, especially outside the well-trodden Chinese tech space.
• Philosophy: Seeking low-competition, deep-value investments with solid governance.

“Foreigners, Europeans, Americans, they like to invest in Chinese tech perhaps, but the rest of the region is kind of untouched so far.”
— Michael Fritzel (01:20)

Why Invest in Asia? (04:15)

• Low Competition: Many Asian stocks lack analyst or foreign investor coverage.
• Valuations: Lower average valuations and minimal competition.
• Diversification: Useful during potential future down cycles for U.S. assets or USD.
• Corporate Governance Caveat: Governance is crucial—best to avoid broad indices in emerging Asia and target well-run companies.

“I think it's very helpful to invest somewhere where nobody else is looking. At least nobody internationally. Why? Because the valuations are typically lower...”
— Michael Fritzel (04:19)

Fairfax India: Investment Thesis (08:53)

Company Overview

• Toronto-listed vehicle, managed by Fairfax Financial (Canada).
• Founder: Prem Watsa, known for a strong long-term track record.
• Invests in Indian assets—both public and private.
• Structure: “Permanent capital vehicle” (NAV can diverge from market price).
• Fees: 1.5% management, 20% performance above 5% hurdle (with high watermark).
• Current NAV: $21/share; trades at ~$17/share (as of recording), about a 20% discount.
• Key Asset: 69% stake in Bangalore International Airport; plan to IPO this core asset in India’s hot stock market.

“It's astounding to me that you have this incredibly highly valued stock market in India … but this company is trading in Toronto, no Indians are investing in it, and I think foreigners aren't really thinking about [it].”
— Michael Fritzel (13:14)

The Modi Effect (08:53)

• Liberalization and reduced corruption after 2014 fueled optimism and fund formation.

Bangalore International Airport: The Crown Jewel (17:09)

Asset Profile

• Monopoly airport for booming Bangalore (India’s “Silicon Valley”).
• Long concession until 2068.
• Passenger traffic: 43M/year, projected to 110M by 2035 (150% growth).
• Striking, modern facility, significant expansion, and tech hub/affluent region.

Financials & IPO Opportunity

• Recent valuation on Fairfax books: $2.6B; possible IPOs discussed at $4–4.5B.
• Revenue: ~$500M; EBITDA margins ~60% (~$300M EBITDA).
• Michael’s estimate: Indian IPO could reprice NAV upward substantially (up to $32/share NAV possible if airport gets $4B+ valuation).
• IPO delayed pending government approval; not expected before late 2025, but organic growth strong even without IPO.

“It is really, I think, the most attractive city in India to live in. Much more so than Mumbai or the other cities.”
— Michael Fritzel (17:35)

“Monopoly airport ... going from 43 to 110 million passengers ... secular growth in volumes. ... There’s like 1,100 planes on order in India ... So you’re going to go from 700 to 1,800.”—Michael Fritzel (19:41)

Revenue Streams

• Aeronautical (regulated, ~16% ROE, based on passenger/landing fees).
• Non-aeronautical (retail, parking, advertising; often 20%+ ROE and key driver of upside).
• Hybrid-till regulatory model allows partial capture of lucrative non-aero upside.

Valuation Math (25:37)

• Book value for airport: $2.6B; actual market value after IPO could be $4–5B+.
• Market cap for Fairfax India: ~$2.3B, making it a heavily discounted play on the airport’s future.
• ~60–80% of Fairfax India’s value is the airport; remainder in finance and industrial assets.

Other Fairfax India Holdings (32:00)

• IFL Finance: Non-bank lender. Founder praised; ~20% ROE.
• Kerala Bank: ~18% ROE.
• Other Assets: Shipping, manufacturing—less material to overall value.
• Macro point: Indian financial sector offers tailwinds as domestic savings gradually move from gold/property into financial products.
• Key Risk: Heavy dependence on macro factors and ongoing reforms.

“None of [the other assets] really interest me all that much, to be honest.”
— Michael Fritzel (32:43)

Macro Risks to the Story (34:01)

• Growth Origins: Recent growth driven by improved banking access, less corruption, and better resource allocation.
• Key Concern: India hasn’t repeated the export-led growth seen in other Asian miracles (Japan, Korea, China). Manufacturing remains a structural weakness.
• Potential Pitfalls: Infrastructure, labor regulation hurdles, lack of mass manufacturing jobs.

“Most countries in Asia that developed ... got wealthy through the export of light goods. India hasn't had that at all ... I would never start a factory because there are so many people you have to bribe.”
— Michael Fritzel (34:31)

• Monitoring Metrics: Macro data matters, but for Fairfax India, focus is on “number of planes in the air, number of passengers”—aviation growth as a practical KPI.

Valuation & Management Philosophy (39:33)

• Approach: SOTP (sum-of-the-parts); applies a 20% discount to NAV reflecting fees, structure, and standard discount for such vehicles.
• Catalysts: IPO of Bangalore Airport; possible narrowing of discount if asset reprices publicly.
• Management: Transition from Prem Watsa (founder) to Ben Watsa (son). Michael prefers Prem but says the reputation and incentives largely remain.

Broader Lessons for Investing in Asia (44:12)

Mistakes to Avoid

• Over-focusing on Low P/E: Cheap stocks can trap investors if governance is poor—profits don’t always accrue to minorities.
• Complex Ownership Structures: Related-party transactions and holding company structures are red flags (especially in East Asia and Southeast Asia).
• US-Listed ADRs: Cautions against relying on U.S.-listed Chinese ADRs due to legal uncertainties, lack of real equity rights, and structural subordination.

“Earnings, they don't necessarily come your way just because you're a minority shareholder … corporate governance is really something you should pay attention to.”
— Michael Fritzel (44:17)

Preferred Markets Now

• Philippines: 12-year bear market has led to low valuations (market P/E below 10). Underowned, overlooked, and high-quality blue chips available cheap.
• Southeast Asia: Similar disinterest offers opportunity.
• Emphasis: Look for safe jurisdictions and visible shareholder protections.

“People are like, businessmen you meet there are top notch ... I feel like [the Philippines] is under owned, it's completely overlooked right now ... and it's also like a US ally, safe jurisdiction as far as I'm concerned.”
— Michael Fritzel (49:12)

Strategy Recap (52:55)

• Targeting underloved markets, contrarian approach to “bargain” countries.
• Focus on simple structures, aligned incentives, and—vital—capital returns (dividends, buybacks) due to risk of long-term undervaluation.

“Beautiful. I couldn't have said it better myself.” (in response to summary of his Asian Century approach) — Michael Fritzel (53:00)

Key Tactical Considerations

• Dividend Focus: Prefers stocks with high dividend yields as a "floor" in cases of delayed rerating.
• Currency Risk: Evaluates real effective exchange rates and current accounts; generally likes undervalued, well-supported currencies (e.g., bullish long-term yen, cautious on Indonesia).
• Japan's Progress: Real, if slow, improvement in governance and buybacks, but underlying conservatism persists.

“You can buy the best blue chips for 12 times PE, the best ones, or like amazing companies for 16 times PE ... To me that's much, much safer ... than trying to compete in AI stocks.”
— Michael Fritzel (54:03)

Notable Quotes & Timestamps

• On Asian small caps:
  “The average company that I cover has no coverage whatsoever. So there's literally zero competition.” (04:15)
• On Bangalore Airport as an asset:
  "It’s a monopoly airport … with a concession until 2068… the government itself is seeing 110 million passengers by 2035.” (18:17)
• On governance risk:
  "Corporate governance, it's really something you should pay attention to and really look at the track record of how people have behaved in the past because behaviors repeat." (46:02)
• On developing a contrarian strategy:
  "I remember when I started looking at Asia … it was packed, people were coming from all over Europe to meet these [Philippine] companies. Today nobody, like there is almost nobody caring about the Philippine market." (49:12)
• On the importance of capital returns:
  "I like to have a minimum of like dividend. Let's say there's a dividend of 8, 9% that for me feels like a floor." (54:07)

Timestamps for Key Segments

• Michael’s Background / Asian Century Stocks: 01:16–03:41
• Why Invest in Asia?: 04:15–07:16
• Introduction to Fairfax India: 08:53–13:12
• Indian Market Valuation & Investment Thesis: 13:12–16:20
• Bangalore Airport Deep Dive: 17:09–25:25
• Valuation Scenarios & IPO Impact: 25:37–29:00
• Other Assets / Macro Context: 32:00–34:01
• Risks & Macro Hurdles for India: 34:01–39:07
• Fairfax India Valuation Methodology: 39:33–42:00
• Importance of Relationships & Management Changes: 42:00–43:24
• Asian Markets Investment Mistakes & Governance: 44:12–48:25
• Favourite Contrarian Market (Philippines): 48:48–51:28
• Strategy Summed Up: 52:55–53:05
• Dividends & Holding Cheap Stocks: 53:44–55:23
• Currency Risk: 56:28–59:46
• Japan Market Trends: 59:46–61:58
• Outro & Where to Find Michael’s Work: 62:42–63:30

Resources

• Asian Century Stocks Substack/Website: asiancenturystocks.com
• Fairfax India: [Stock info via TSX, ticker: FIH.U]
• Interactive Brokers, Fiscal AI: Mentioned as sponsor partners for access and research.

Closing Takeaways

• Asia, outside “headline” China and Japan, remains underexplored by western investors.
• Governance and incentives are as important as business quality in emerging markets.
• Fairfax India offers a unique, discounted opportunity to access Indian growth through a quality asset—Bangalore Airport—with an upcoming IPO as a key catalyst.
• Patience, dividends, and currency awareness are vital in these sometimes illiquid and overlooked markets.

This episode is a must-listen for investors seeking international diversification and practical insights into how to approach Asia’s hidden value—and for those interested in a deep-dive case study on a compelling asset-backed play.