In this article we discuss the 10 best ADR stocks to buy In 2021.
Investors in the United States have been steadily pouring money into foreign equities ever since the process was made easier through the introduction of American Depositary Receipt (ADR) in the early part of the twentieth century. According to an estimate by financial expert Arin Ray, the investments into ADRs were increasing at a rate of more than 10% almost a century after they were first introduced, reaching close to $4 trillion by the end of 2010, representing approximately 20% of the total equity holdings in the US.
Ray, part of financial services company Celent, cited the high rates of return and a frenzy for diversification as some of the main reasons behind the popularity of ADRs. Since his research was published, the size and trading activity of ADRs on the stock market has grown dramatically. Chinese companies like Alibaba Group Holding Limited (NYSE: BABA), Baidu, Inc. (NASDAQ: BIDU), and NIO Inc. (NYSE: NIO) now represent an increasing chunk of the total ADR-related spending in the US, taking the mantle over from British firms in the past few years.
Alibaba Group Holding Limited (NYSE: BABA) is a technology company with core interests in ecommerce. According to a data depository on ADRs, maintained by investment bank JP Morgan, Alibaba Group Holding Limited (NYSE: BABA) is the second most popular ADR on the market in the US, with a 30-day average trading volume of 15.70 million and a prior day trading value of over $2 billion. The bank has grouped Alibaba Group Holding Limited (NYSE: BABA) into the consumer services category in the depository.
NIO Inc. (NYSE: NIO), the Shanghai-based electric vehicle maker often referred to as the ‘Tesla of China’ is the most popular ADR on the market. It has a 30-day average trading volume of close to 71.5 million and a prior day trading value of $2.21 billion. NIO Inc. (NYSE: NIO) has recently been hit by supply chain issues and falling demand for electric vehicles in the first few weeks of the second quarter, posting 6,711 vehicle deliveries in May, a 5.5% month-on-month decrease that still represents over 95% year-on-year increase.
Another foreign equity that is very popular in the US is Beijing-based Baidu, Inc. (NASDAQ: BIDU), the internet services company that operates the Chinese internet search engine and has invested aggressively in artificial intelligence in recent years. Baidu, Inc. (NASDAQ: BIDU) is one of the most active and volatile stocks on the market this year, reaching a 52-week high of over $354 in late February, before plunging amid a Chinese antitrust crackdown that saw share prices fall close to 50% in the ensuing weeks.
Investors should be wary of political, inflationary, and exchange-related risks often associated with ADRs before pouring money into them. ADRs are a high risk, high-reward offering that even hedge funds find difficult to manage. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the 10 best ADR stocks to buy in 2021. While selecting these stocks, we kept in mind the investor interest around these companies, the ratings of market analysts, as well as the basic business fundamentals which might help these firms grow through the rest of the fiscal year.
Best ADR Stocks to Buy in 2021
10. BioNTech SE (NASDAQ: BNTX)
Number of Hedge Fund Holders: 18
BioNTech SE (NASDAQ: BNTX) is a Germany-based biotechnology company founded in 2008. It is placed tenth on our list of 10 best ADR stocks to buy In 2021. The company’s shares have offered investors returns exceeding 402% over the past twelve months. The company has pioneered a patient-specific approach to therapeutics for the treatment of several diseases, including advanced melanoma, prostate cancer, multiple solid tumors, and others. It has a market cap of over $57 billion.
On May 20, BioNTech SE (NASDAQ: BNTX) CEO Ugur Sahin told news media that the COVID-19 vaccine developed by the company was up to 75% effective against the Indian variant of the coronavirus.
At the end of the first quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $172 million in BioNTech SE (NASDAQ: BNTX), up from 17 the preceding quarter worth $170 million.
9. Gold Fields Limited (NYSE: GFI)
Number of Hedge Fund Holders: 15
Gold Fields Limited (NYSE: GFI) is a South Africa-based gold mining company founded in 1998. It is ranked ninth on our list of 10 best ADR stocks to buy In 2021. The stock has returned more than 36% to investors in the past year. The company is dual-listed in South Africa and the United States, with mining interests in Chile, South Africa, Ghana, Australia, and Peru, among other countries. These mines have an annual gold-equivalent production of almost 2.24 million ounces, with reserves of over 50 million ounces.
On May 6, Gold Fields Limited (NYSE: GFI) posted earnings results for the first three months of 2021, reporting a revenue of over $1.7 billion in the first quarter of 2021, up more than 14% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in Gold Fields Limited (NYSE: GFI) with 12.4 million shares worth more than $117 million.
Just like Alibaba Group Holding Limited (NYSE: BABA), Baidu, Inc. (NASDAQ: BIDU), and NIO Inc. (NYSE: NIO), Gold Fields Limited (NYSE: GFI) is one of the best ADR stocks to buy In 2021.
8. AstraZeneca PLC (NASDAQ: AZN)
Number of Hedge Fund Holders: 34
AstraZeneca PLC (NASDAQ: AZN) is a United Kingdom-based biotechnology company founded in 1999. It is placed eighth on our list of 10 best ADR stocks to buy In 2021. The company’s shares have offered investors returns exceeding 15% over the course of the past three months. The firm was one of the first to develop a vaccine for the coronavirus and has been working on medicines for other diseases as well. In addition to marketing pharma, the firm also offers specialty care physicians and primary care through representative offices.
On June 7, news agency Reuters reported that AstraZeneca PLC (NASDAQ: AZN) had signed a deal with British firm NetScientific to commercialize the COVID-19 test developed by the former, giving the pharma company royalty rights on future sales of the product.
At the end of the first quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in AstraZeneca PLC (NASDAQ: AZN), down from 41 in the previous quarter worth $2.9 billion.
Just like Alibaba Group Holding Limited (NYSE: BABA), Baidu, Inc. (NASDAQ: BIDU), and NIO Inc. (NYSE: NIO), AstraZeneca PLC (NASDAQ: AZN) is one of the best ADR stocks to buy In 2021.
In its Q4 2020 investor letter, Baron Health Care Fund, an asset management firm, highlighted a few stocks and AstraZeneca PLC (NASDAQ: AZN) was one of them. Here is what the fund said:
“AstraZeneca PLC is a multinational pharmaceutical company developing drugs across multiple therapeutic areas such as oncology and respiratory diseases. Shares were impacted by news of AstraZeneca’s joint development with Oxford University of a viral-based COVID-19 vaccine. Given a mixed data set due to an unforeseen error in dosing that occurred in the Brazilian market, the vaccine timelines slipped, hurting share performance. Our investment thesis on AstraZeneca is not dependent on COVID-19 but rather its best-in-class large-cap growth profile, and we retain conviction.”
7. Vale S.A. (NYSE: VALE)
Number of Hedge Fund Holders: 31
Vale S.A. (NYSE: VALE) is a Brazil-based company in the metals and mining business. It was founded in 1942 and is ranked seventh on our list of 10 best ADR stocks to buy In 2021. The stock has returned over 100% in returns over the past year. In addition to mining copper, gold, silver, and other metals, as well as coal, the firm also provides logistical services related to these products. It is one of the largest companies in Brazil and the largest iron ore producer in the world. It has a market cap of over $113 billion.
On June 8, Vale S.A. (NYSE: VALE) announced that it would be paying close to $2.5 billion to settle liabilities related to a mining project in Mozambique that would speed up an exit from the coal industry for the mining firm.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Vale S.A. (NYSE: VALE) with 38 million shares worth more than $661 million.
Just like Alibaba Group Holding Limited (NYSE: BABA), Baidu, Inc. (NASDAQ: BIDU), and NIO Inc. (NYSE: NIO), Vale S.A. (NYSE: VALE) is one of the best ADR stocks to buy In 2021.
6. Pinduoduo Inc. (NASDAQ: PDD)
Number of Hedge Fund Holders: 56
Pinduoduo Inc. (NASDAQ: PDD) is a China-based technology firm that runs an ecommerce platform which caters to the agriculture industry. It was founded in 2015 and is placed sixth on our list of 10 best ADR stocks to buy In 2021. The company’s shares have offered investors returns exceeding 72% over the past twelve months. Some of the products sold by the online marketplace include fresh produce, food, beverages, clothes, household goods, personal care items, and electronics, among others.
On May 26, Pinduoduo Inc. (NASDAQ: PDD) posted earnings results for the first fiscal quarter, reporting a revenue of $3.3 billion, up 267% year-on-year and beating market predictions by $180 million. Sales and marketing spending during the period was up 78%.
At the end of the first quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $6.2 billion in Pinduoduo Inc. (NASDAQ: PDD), up from 54 in the preceding quarter worth $10.5 billion.
Just like Alibaba Group Holding Limited (NYSE: BABA), Baidu, Inc. (NASDAQ: BIDU), and NIO Inc. (NYSE: NIO), Pinduoduo Inc. (NASDAQ: PDD) is one of the best ADR stocks to buy In 2021.
In its Q1 2021 investor letter, Tao Value, an asset management firm, highlighted a few stocks and Pinduoduo Inc. (NASDAQ: PDD) was one of them. Here is what the fund said:
“Pinduoduo reported a strong quarter, reporting MAU of 720 million, now surpassing Taobao. However, it was overshadowed by a bigger news on Colin Huang resigning from Board and completely disassociating himself from PDD’s management & operation. Huang explained in his letter to shareholders that he would start fundamental research initiatives in food science. Although not entirely shocked (as he already stepped down from CEO July 2020), I am surprised by the fast pace of such transition. I remain confident in the organization and the culture Huang built but will monitor it closely.”
5. JD.com, Inc. (NASDAQ: JD)
Number of Hedge Fund Holders: 75
JD.com, Inc. (NASDAQ: JD) is a China-based ecommerce firm. It was founded in 1998 and is ranked fifth on our list of 10 best ADR stocks to buy In 2021. The company’s shares have returned more than 20% to investors over the course of the past twelve months. The company operates close to 900 warehouses across the world to aid the online marketplace. The firm owns the largest ecommerce platform in China in terms of revenue. The company registered a massive boom in sales numbers during the coronavirus lockdowns last year.
On May 28, JD.com, Inc. (NASDAQ: JD) launched JD Logistics in Hong Kong. JD Logistics had earlier raised $3.1 billion in the second-largest initial public offering in Hong Kong this year, finishing the first day of trading with an intraday high of 18%.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in JD.com, Inc. (NASDAQ: JD) with 51.6 million shares worth more than $4.3 billion.
In its Q1 2021 investor letter, Arisaig Partners, an asset management firm, highlighted a few stocks and JD.com, Inc. (NASDAQ: JD) was one of them. Here is what the fund said:
“Our largest holding as a firm, JD.com, we expect to grow earnings at an annualised rate of 30% over the next five years, implying it will trade on an EV / EBITDA of 7.5x at the end of this period. Is this a growth stock or a value stock? Does anyone care? Do these labels really matter?
For the Asia Fund, with a higher pre-existing allocation to our core FMCG holdings coming into the year, we took advantage of capital market volatility to further concentrate on our highest conviction names. JD.com has been the main destination for our limited reallocations as evidence continues to emerge supporting our thesis that the company has a strong right-to-win in the large and highly fragmented USD1.8th Chinese grocery market. We have also been encouraged by the fact that after years of persistence, the company is beginning to engage with us on ESG issues (we have specifically discussed data protection, climate change and the circular economy). ESG is now being considered at the board level, and specific sustainability reporting should follow in the coming months. Having long displayed a healthy obsession with customer service, we interpret these latest conversations as a sign that JD is beginning to develop a more sophisticated understanding of its impact on all stakeholders.”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)
Number of Hedge Fund Holders: 76
Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) is a Taiwan-based semiconductor manufacturer founded in 1987. It is placed fourth on our list of 10 best ADR stocks to buy In 2021. The company’s shares have returned more than 103% to investors over the past year. The stock has climbed steeply in recent weeks as global supply chain issues drive up the prices of semiconductor chips and lead to a shortage that is expected to last for several months.
On June 1, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) announced at an annual gathering that it was on track to begin volume production of 5nm chips, already approved for usage in artificial intelligence products, at a chip fabrication plant in Arizona by 2024.
At the end of the first quarter of 2021, 76 hedge funds in the database of Insider Monkey held stakes worth $10.8 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), up from 72 in the preceding quarter worth $11.8 billion.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was one of them. Here is what the fund said:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 8.9% during the quarter.
Similar to last quarter, the supply-demand imbalance in semiconductor chips continues to benefit TSMC. To fuel new technological advances and meet the current supply imbalance, we see significantly increased capital spending across the industry over the coming years.
TSMC has an extraordinary track record of return on these large investments despite their rapid historical cadence of expansion. I remain hopeful that the large capital expenditure plan they now have ($100 billion of investment over the next three years) will be money well spent and not lead to industry oversupply in the medium term. Hopefully, future returns on these investments will look as good as those of the past.”
3. NIO Inc. (NYSE: NIO)
Number of Hedge Fund Holders: 28
NIO Inc. (NYSE: NIO) is a Shanghai-based automobile manufacturer. It was founded in 2014 and is ranked third on our list of 10 best ADR stocks to buy In 2021. The company has gained prominence in recent years as one of the premier electric vehicle makers in China, quite possibly the largest new energy vehicle market in the world. The company makes and sells electric vehicles in the United Kingdom, Germany, and the United States in addition to China. It markets electric SUVs and smart electric sedans.
On June 1, investment advisory Citi upgraded NIO Inc. (NYSE: NIO) stock to Buy from Neutral with a price target of $58.30 on the back of increasing demand for electric vehicles in the latter part of April after a lean spell through the preceding few weeks.
At the end of the first quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in NIO Inc. (NYSE: NIO), down from 34 in the preceding quarter worth $2.6 billion.
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE: NIO) was one of them. Here is what the fund said:
“Nio, Inc. (NIO): It’s stock up 360% since the beginning of June on no news, and one of our more troublesome short positions, the Chinese electric vehicle manufacturer is valued at a whopping $17bln on trailing revenue of only $1.1bln. In 2019, the business ran a -17% gross margin, a -140% EBITDA margin & burned ~$1.5bln in cash in 2019. The stock has become one of the most popular stocks among retail traders with approximately 250,000 accounts holding the name just on the popular Robinhood trading platform.”
2. Alibaba Group Holding Limited (NYSE: BABA)
Number of Hedge Fund Holders: 135
Alibaba Group Holding Limited (NYSE: BABA) is a China-based multinational technology company primarily in the ecommerce business. It was founded in 1999 and is placed second on our list of 10 best ADR stocks to buy In 2021. Over the years, Alibaba has expanded from the core retail business to cloud computing, digital media and entertainment, internet-based health platforms, financial services, and logistics, among others. It has a market cap of over $580 billion and posted more than $109 billion in annual revenue in the previous fiscal year.
Alibaba Group Holding Limited (NYSE: BABA) stock has taken a beating in recent weeks as the Chinese government cracks down on dual listed companies. On April 30, the firm froze pay for senior executives and raised the salaries of junior staff in a move aimed at boosting morale.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE: BABA) with 13.9 million shares worth more than $3.1 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE: BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
1. Baidu, Inc. (NASDAQ: BIDU)
Number of Hedge Fund Holders: 89
Baidu, Inc. (NASDAQ: BIDU) is a Beijing-based multinational technology company with stakes in several businesses, including internet-related services, artificial intelligence, and digital advertisements, among others. It was founded in 2000 and is ranked first on our list of 10 best ADR stocks to buy In 2021. The company’s shares have offered investors returns exceeding 59% over the course of the past twelve months. Baidu is one of the largest internet companies in China and owns the premier search engine in the country.
On May 19, investment advisory Daiwa boosted the revenue forecasts of Baidu, Inc. (NASDAQ: BIDU) for 2021 by 2% on the back of expectations that the artificial intelligence and cloud-based services business of the company would contribute more than expected to the overall earnings.
At the end of the first quarter of 2021, 89 hedge funds in the database of Insider Monkey held stakes worth $6.5 billion in Baidu, Inc. (NASDAQ: BIDU), up from 51 in the preceding quarter worth $4.6 billion.
In its Q1 2021 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Baidu, Inc. (NASDAQ: BIDU) was one of them. Here is what the fund said:
“We have also fully exited our stake in Baidu, following their outstanding performance during the period and their lower relative upside potential compared to other investment alternatives, which we will discuss below.
The Chinese technology platform company Baidu has also been held in the portfolios managed by Alejandro, Miguel and myself for several years. During this period, we have seen very high volatility in its share price, which we have taken advantage of to make significant rebalancing moves in our position (in fact, we even sold our entire position once, when we thought the stock’s upside potential was exhausted). After several years of instability, market sentiment turned very positive, putting an end to the historical advertising problems in the healthcare sector, the divestments in O2O (Online-to-Offline) businesses that continued to weigh on the company’s margins, the IPO of part of the iQiyi streaming business (which hid Baidu’s underlying cash generation capacity) and the tough competition from other industry giants such as Tencent and Alibaba, as well as the entry of new players with disruptive business models (ByteDance). At the same time, the company’s recent commitment to electric vehicles contributed even more to this change of narrative. Baidu’s share price rose almost fourfold from the March 2020 lows to all-time highs and reached a valuation where the margin of safety, in our view, was too narrow.”
You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.
Follow Insider Monkey on Twitter
Suggested Articles:
- 15 Most Valuable Alcohol Companies
- Chuck Akre’s Top 10 Stock Holdings
- Billionaire Julian Robertson’s Top 10 Stocks
Disclose. None. 10 Best ADR Stocks to Buy in 2021 is originally published on Insider Monkey.
