In this article, we discuss 10 American stocks with high exposure to China.
On top of slowing economic growth, China is facing a drought which threatens food production, leading the local authorities and the state to go all out and ensure that the remaining crops survive an extremely hot summer. The government is also urging for water conservation, and calling out farmers to implement water saving methods like staggered irrigation and cloud seeding.
The Chinese mortgage crisis is impacting economic growth in the country as well, as banks are looked upon for loans and extensions to alleviate some pressure on builders. However, banks are unsure whether these loans will be paid back. Not assisting with loans also means that banks end up losing mortgage payments. The pandemic-driven damage is still impacting the economy as well.
According to a Bloomberg report, dated August 24, China is enhancing its economic stimulus package, injecting another 1 trillion yuan, or $146 billion, which is meant for infrastructure spending. However, this financial support will not be nearly enough for the economy to rebound from multiple Covid lockdowns and a real estate crisis. The fiscal package will support state banks in order to sponsor more infrastructure projects, and local governments will be allotted money as well.
Economists were somewhat unenthusiastic about the Chinese financial measures, and the markets also remained muted. Goldman Sachs predicts that the stimulus is not sufficient to boost economic growth from 3% like the government expects.
Since the United States has always had deep ties with China in terms of trade, despite political tensions, American stocks are vulnerable to China’s economic slowdown. Some American stocks with high exposure to the Asian superpower include Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and NIKE, Inc. (NYSE:NKE).
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Our Methodology
We selected the American stocks with the highest Chinese exposure in terms of manufacturing facilities, raw materials, and revenue. We have ranked the list according to the hedge fund sentiment around the stocks, which was assessed from Insider Monkey’s Q2 2022 database of around 900 hedge funds.
American Stocks with High Exposure to China
10. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 42
Amphenol Corporation (NYSE:APH) is a Connecticut-based company that designs and manufactures electrical, electronic, and fiber optic connectors in the United States, China, and internationally. It operates through three segments – Harsh Environment Solutions, Communications Solutions, and Interconnect and Sensor Systems. In 2021, China constituted approximately 28% of Amphenol Corporation (NYSE:APH)’s net sales. The company mentioned in its 2021 annual report that the US has imposed many laws on Chinese products, and retaliatory laws by China could really impact Amphenol Corporation (NYSE:APH) and its customers in China and internationally. U.S. trade policies, legislation, and tariffs affecting China also increased Amphenol Corporation (NYSE:APH)’s costs significantly in 2021.
UBS analyst Chris Snyder on August 23 raised the price target on Amphenol Corporation (NYSE:APH) to $93 from $88 and kept a Buy rating on the shares. The analyst cited indications of margin momentum with Q2 operating margin of 20.7% reaching the highest level since 2018, given improving price/cost and recent accretive acquisitions. Amphenol Corporation (NYSE:APH) has “multiple quarters of margin runway” as its guidance proposed more improvement in Q3 price/cost and the analyst expects abating cost pressure consequently.
According to Insider Monkey’s data, 42 hedge funds were bullish on Amphenol Corporation (NYSE:APH) at the end of the second quarter of 2022, compared to 40 funds in the prior quarter. Select Equity Group is the biggest position holder in the company, with roughly 6.4 million shares worth $411 million.
Like Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and NIKE, Inc. (NYSE:NKE), Amphenol Corporation (NYSE:APH) is one of the prominent American stocks with strong ties to China.
Here is what Richie Capital Group has to say about Amphenol Corporation (NYSE:APH) in their Q4 2020 investor letter:
“Amphenol (APH – Up 18.7%) – In December, our high-speed, specialty connector manufacturer announced the acquisition of MTS Systems Corp for $1.7B to enhance their sensor products catalog. Having completed more than a dozen acquisitions since 2016, growth through acquisition is a key tenet of their business strategy and we view this transaction as business as usual. You can read more about our investment thesis for Amphenol here.”
9. Las Vegas Sands Corp. (NYSE:LVS)
Number of Hedge Fund Holders: 42
Las Vegas Sands Corp. (NYSE:LVS) is a Nevada-based company that owns and runs integrated resorts in Asia and the United States. The company operates multiple properties in Macau, including the Sands Macao, The Londoner Macao, The Venetian Macao, The Plaza Macao, and The Parisian Macao. According to BofA, as of 2020, Las Vegas Sands Corp. (NYSE:LVS)’s revenue exposure to China stood at 63%. The company reported a loss per share of $0.34 for the June quarter, missing Wall Street consensus by $0.05.
On July 21, Wells Fargo analyst Daniel Politzer upgraded Las Vegas Sands Corp. (NYSE:LVS) to Overweight from Equal Weight with a price target of $45, up from $43. The analyst cited the “attractive momentum” in Singapore, Macau expectations that can’t get any worse, and valuation. If or when Macau does reopen, the analyst sees Las Vegas Sands Corp. (NYSE:LVS) reaching the mid-$50s, with MBS and Macau each worth $28 per share, versus his pitfall case of $29, which is 20% less than current levels.
According to Insider Monkey’s Q2 data, 42 hedge funds were long Las Vegas Sands Corp. (NYSE:LVS), up from 39 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a notable position holder in the company, with 3.6 million shares worth about $121.8 million.
Here is what Baron Real Estate Fund has to say about Las Vegas Sands Corp. (NYSE:LVS) in its Q1 2022 investor letter:
“Following a 50%-plus decline in the share price of Las Vegas Sands Corporation from its 2021 peak share price of $67 to $34, we began acquiring shares of this global leader in the development and operation of luxury casino resorts in the fourth quarter of 2021 and continued to acquire shares in the most recent quarter. We believe Las Vegas Sands’ market-leading resorts in Macau and Singapore position the company for strong growth when travel and tourism spending rebounds. Las Vegas Sands maintains a liquid and investment grade balance sheet and is currently valued at a significant discount to our assessment of replacement cost.”
8. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 44
DuPont de Nemours, Inc. (NYSE:DD) is a Delaware-based company that provides materials and solutions in the United States, Canada, the Asia Pacific, Latin America, Europe, the Middle East, and Africa. DuPont de Nemours, Inc. (NYSE:DD)’s center in Shanghai is the key location for product development, customer support, and materials testing. It is one of the notable American stocks with high exposure to China. China’s State Administration for Market Regulation is delaying the approval for DuPont de Nemours, Inc. (NYSE:DD)’s $5.2 billion acquisition of Rogers Corporation (NYSE:ROG). Previously, the deal was supposed to conclude in Q2 2022, but now DuPont said the transaction is expected to close in Q3.
Citi analyst P.J. Juvekar on August 8 raised the price target on DuPont de Nemours, Inc. (NYSE:DD) to $75 from $72 and maintained a Buy rating on the shares after the Q2 results.
Among the hedge funds tracked by Insider Monkey, 40 North Management held the leading position in DuPont de Nemours, Inc. (NYSE:DD) at the end of June, with 5.88 million shares worth $326.8 million. Overall, 44 hedge funds were bullish on DuPont de Nemours, Inc. (NYSE:DD) in Q2 2022, compared to 50 funds in the prior quarter.
Here is what Rhizome Partners has to say about DuPont de Nemours, Inc. (NYSE:DD) in its Q1 2021 investor letter:
“We have written extensively about the anticipated DuPont’s Reverse Morris Trust merger with International Flavors and Fragrances (IFF) in January of 2021. During the quarter, DuPont shares traded up significantly in anticipation of the deal. We tendered about 40% of our DuPont shares for IFF and received about half of the allocation due to pro-ration. Investors are finally starting to appreciate DuPont’s effort to cut costs, streamline operations, and spin off companies into pure-play companies that trade at higher multiples. We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as DuPont.”
7. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Holders: 46
MGM Resorts International (NYSE:MGM) is headquartered in Las Vegas, Nevada, operating casino, hotel, and entertainment resorts in the United States and Macau. The company has three segments – Las Vegas Strip Resorts, Regional Operations, and MGM China. MGM Resorts International (NYSE:MGM) has joint ventures with Chinese firms to run resorts and boutique hotels, and it operates multiple establishments in the Asian country through its MGM China division as well.
On August 4, Truist analyst Barry Jonas raised the price target on MGM Resorts International (NYSE:MGM) to $40 from $35 but kept a Hold rating on the shares. The analyst cited the company’s “strong” Q2 earnings beat with record Vegas and Regionals performance. He expects the solid results to prevail in Q3 as well. He added that while MGM Resorts International (NYSE:MGM) is “perfectly” executing its strategy, his Hold rating factors in investor concerns of inflation and recession, as well as clear weakness in Macau.
According to Insider Monkey’s data, 46 hedge funds were long MGM Resorts International (NYSE:MGM) at the end of the second quarter of 2022, compared to 59 funds in the preceding quarter. Keith Meister’s Corvex Capital is the biggest stakeholder of the company, with 6.67 million shares worth $193.20 million.
Here is what Baron Real Estate Fund has to say about MGM Resorts International (NYSE:MGM) in its Q1 2022 investor letter:
“At this stage, we believe several public real estate companies offer compelling long-term return prospects that, in some cases, may include a trifecta combination of growth, dividends, and an improvement in valuation. Examples of public real estate companies that are attractively valued includes: MGM Resorts International. Leading global casino and entertainment company. At its recent price of $40 per share, we believe the company is valued at a significant discount to our reasonable $60 per share estimate of the sum-of-the-parts value of its business.”
6. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 55
Texas Instruments Incorporated (NASDAQ:TXN) is a semiconductor manufacturing company. The company provides its products to electronics designers and manufacturers worldwide. China accounts for more than 50% of Texas Instruments Incorporated (NASDAQ:TXN)’s revenue. The pandemic-driven lockdown in Shanghai and the US-China tensions can highly affect Texas Instruments Incorporated (NASDAQ:TXN).
Mizuho analyst Vijay Rakesh on July 27 lowered the price target on Texas Instruments Incorporated (NASDAQ:TXN) to $168 from $175 and maintained a Neutral rating on the shares after the company posted solid quarterly earnings. The analyst still believes Texas Instruments Incorporated (NASDAQ:TXN) faces possible peak margins and higher pricing pressure as industry supply eases amid a potentially slowing macro backdrop.
According to Insider Monkey’s data, Texas Instruments Incorporated (NASDAQ:TXN) was part of 55 hedge fund portfolios at the end of Q2 2022, up from 46 funds in the earlier quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the biggest stakeholder of the company, with 3.5 million shares worth over $542 million.
In addition to Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and NIKE, Inc. (NYSE:NKE), Texas Instruments Incorporated (NASDAQ:TXN) is one of the American stocks with high exposure to China.
Here is what Davis Opportunity Fund has to say about Texas Instruments Incorporated (NASDAQ:TXN) in its Q4 2021 investor letter:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel, Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM Incorporated (NASDAQ:QCOM) is a California-based company that develops foundational technologies for the wireless industry worldwide. In 2021, QUALCOMM Incorporated (NASDAQ:QCOM) reported a full-year revenue of $33.5 billion, and $22.5 billion came from China. This means roughly 67.4% of the firm’s total revenue was exposed to China. QUALCOMM Incorporated (NASDAQ:QCOM) is one of the companies with the highest exposure to China, and an economic slowdown in China will lead to problems for the company.
On July 29, DZ Bank analyst Ingo Wermann downgraded QUALCOMM Incorporated (NASDAQ:QCOM) to Hold from Buy with a $150 price target.
According to Insider Monkey’s data, 71 hedge funds were bullish on QUALCOMM Incorporated (NASDAQ:QCOM) at the end of Q2 2022, compared to 73 funds in the prior quarter. Alkeon Capital Management is a significant position holder in the company, with 4.2 million shares worth $541.15 million.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about QUALCOMM Incorporated (NASDAQ:QCOM) in its Q4 2021 investor letter:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk has said that of the 3 million vehicles the company has produced, one-third of them have been built in China. Tesla, Inc. (NASDAQ:TSLA)’s Shanghai factory was opened in 2018, and there was a lot of production backlog due to COVID-19 restrictions and supply shortages. China is one of the main markets for Tesla vehicles and Musk has said that it would eventually become the biggest end-market for the company.
On August 25, Berenberg analyst Adrian Yanoshik lowered the price target on Tesla, Inc. (NASDAQ:TSLA) to $290 from $850 and maintained a Hold rating on the shares. The analyst adjusted the target to factor in the 3:1 stock split. He expects Tesla, Inc. (NASDAQ:TSLA)’s gross margin to benefit as its production mix moves away from Fremont, California, “which suffers from high labor costs, an inefficient layout and relatively dated equipment”. However, after demo drives, the analyst sees restricted near-term potential from autonomous driving.
According to Insider Monkey’s data, 72 hedge funds were bullish on Tesla, Inc. (NASDAQ:TSLA) at the end of Q2 2022, compared to 80 funds in the prior quarter. ARK Investment Management is a notable stakeholder of the company, with 1.4 million shares worth over $1 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC had to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc. (NASDAQ:TSLA). At its Battery Day last year, Tesla, Inc. (NASDAQ:TSLA) projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
3. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
NIKE, Inc. (NYSE:NKE) manufactures and markets athletic footwear, apparel, equipment, and accessories worldwide. According to Barron’s, as of May 2022, NIKE, Inc. (NYSE:NKE) has 18% revenue exposure to China. Exane BNP Paribas analyst Laurent Vasilescu on August 9 downgraded NIKE, Inc. (NYSE:NKE) to Neutral from Outperform with a price target of $118, down from $151. NIKE, Inc. (NYSE:NKE) highlighted a strategy to increase revenues by high-single to low-double digits and reach a high-teen EBIT margin by FY25 and these targets were mentioned in last July’s 10-K filing, the analyst told investors. However, he observed that these FY25 financial targets were redacted in the 10-K recently released and these targets might be “on pause” due to growing uncertainty in China. NIKE, Inc. (NYSE:NKE) is also experiencing likely market share losses and increased discounting in the United States, its biggest market, contended the analyst.
Among the hedge funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management featured as the largest stakeholder of the company in Q2, with 8.5 million shares worth about $873 million. Overall, 72 hedge funds were bullish on the stock at the end of June, up from 67 funds in the earlier quarter.
In its Q4 2021 investor letter, ClearBridge Investments highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“NIKE, Inc. (NYSE:NKE) is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold direct. NIKE, Inc. (NYSE:NKE) is also still under-indexed to the women’s category, which we see as a significant ongoing catalyst.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is headquartered in Santa Clara, California, providing graphics, networking, and semiconductor solutions in the United States, Taiwan, China, and internationally. The company sells its GPUs to many Chinese firms, and the slowdown in consumer demand in China has really impacted NVIDIA Corporation (NASDAQ:NVDA).
On August 25, Morgan Stanley analyst Joseph Moore said NVIDIA Corporation (NASDAQ:NVDA)’s softer guidance in its gaming business should “clearly frame the bottom” after a 60% drop in quarterly revenues in only two quarters. However, the data center slowdown and ancillary challenges around the business make him “pause” due to the higher multiple and the “unexpected questions” on the data center side. After NVIDIA Corporation (NASDAQ:NVDA)’s Q2 results, he maintained an Equal Weight rating on the stock with a $182 price target.
According to Insider Monkey’s Q2 data, 84 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA), down from 102 funds in the last quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is one of the significant stakeholders of the company, with 2.5 million shares worth about $386 million.
Here is what ClearBridge Large Cap Growth ESG Strategy has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2022 investor letter:
“Chipmaker Nvidia (NASDAQ:NVDA) has also been pressured by multiple compression of higher growth companies and weakness in its gaming business. While Nvidia has grown into a top 10 position with its strong performance through late 2021, we have been consistently trimming the position to derisk against short-term volatility in its gaming business. The company is clearly exposed to the semiconductor cycle but also participates in the secular growth of cloud and AI adoption through its data center business. With these secular drivers intact and new products ramping up in the second half of the year, we are maintaining an overweight to the company.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) has the highest exposure to China among the big tech firms. According to Markets Insider, roughly 75%-80% of Apple Inc. (NASDAQ:AAPL)’s product sales are attributed to China and 60%-62% of its products are manufactured in China. Additionally, 18% of the company’s annual revenue is made in Greater China.
On August 19, KeyBanc analyst Brandon Nispel raised the price target on Apple Inc. (NASDAQ:AAPL) to $185 from $177 and maintained an Overweight rating on the shares. The analyst recommends owning Apple Inc. (NASDAQ:AAPL) and lifted the price target “based on strong trends”. Keybanc’s data “rapidly rebounded” after the firm’s weak results in April through June, the analyst told investors. July is seasonally the strongest growth month of Apple Inc. (NASDAQ:AAPL)’s fiscal Q4, which seems to be off to a robust start, added the analyst.
According to Insider Monkey’s data, 128 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL) at the end of Q2 2022, compared to 131 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the leading position holder in the company, with almost 895 million shares worth $122.3 billion.
Here is what Wedgewood Partners has to say about Apple Inc. (NASDAQ:AAPL) in its Q2 2022 investor letter:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
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Disclosure: None. 10 American Stocks with High Exposure to China is originally published on Insider Monkey.
