An interesting investment concept advanced by fund managers Global Thematic Investors is to favour companies in emerging economies that are the offspring of major multinationals that hold most, or at least a substantial portion, of their locally-listed shares.

These “children” have the advantages of being able to offer the well-established brands of, and access to the manufacturing skills and research of, their “parents,” while selling into buoyant consumer markets with rapidly-expanding middle classes where they often enjoy monopoly-type pricing power.

A good example is Unilever Indonesia , 85 per cent owned by the eponymous Anglo-Dutch consumer goods giant, but listed in Jakarta , where you as a foreign investor can invest relatively easily in the shares. Its annual earnings growth has averaged 20 per cent over the past five years.

“If your company distributes essential goods like soap, shampoo, cooking oil or baby milk, and is dominant in that business, your business has monopoly characteristics,” GTI explains.

“A dominant brand, and the consumer trust that goes with that dominance, almost guarantees you outsized profits. This is the secret of the likes of Nestlé, Procter & Gamble and Unilever all over the world.”

David Fuller's view This issue has an extensive section which addresses issues mentioned in the email of the day which I posted yesterday: “On purchasing affiliates of dividend aristocrats.”