In this article, we discuss the 10 best non-tech Chinese stocks to buy now.
Chinese stocks have been hammered in the past few months due to factors like concerns around delistings in the United States, a crackdown against local big tech from the government in Beijing, a spike in COVID-19 cases in China, and worries about the relationships of Chinese firms with Russian businesses amid Western sanctions on Moscow. A tangible indicator of this bearish outlook is the performance of the iShares MSCI China ETF (NASDAQ:MCHI), a fund that tracks the performance of big Chinese firms. The fund is down 16% in the past six months.
However, in mid-March, a report by Chinese news agency Xinhua indicated that a committee chaired by Chinese Vice Premier Liu He had instructed the central bank to actively roll out policies that benefit the market. The committee also pledged to keep the financial markets stable. The report served to boost the share price of major Chinese firms in the US. The iShares MSCI China ETF (NASDAQ:MCHI) soared as much as 12% in the week following the report.
Despite a change in tone from Beijing, experts have warned that the State Council of China may try to break up big Chinese tech firms. Dan Pipitone, the CEO of brokerage firm TradeZero, has said that the shorting community is now targeting Chinese stocks as rumors about the break up gather pace. In this context, investors are exiting tech firms and moving towards smaller, non-tech Chinese stocks. Some of the top non-tech Chinese stocks to buy now include KE Holdings Inc. (NYSE:BEKE), New Oriental Education & Technology Group Inc. (NYSE:EDU), and NIO Inc. (NYSE:NIO), among others discussed in detail below.
Photo by Joshua Mayo on Unsplash
Our Methodology
The companies that trade on exchanges in the United States but are based in China were selected for the list. The list was further refined by identifying the firms that operate in sectors other than technology. The analyst ratings, business fundamentals, and growth catalysts for the stocks are also discussed to provide some additional context for their investment decisions.
Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Best Non-Tech Chinese Stocks to Buy Now
10. Adagene Inc. (NASDAQ:ADAG)
Number of Hedge Fund Holders: 4
Adagene Inc. (NASDAQ:ADAG) is a clinical-stage biopharma firm that develops monoclonal antibody drugs for cancers. The company has recently signed important drug deals with giants like Sanofi and Merck. The former is a partnership for the development and commercialization of immuno-oncology drugs worth up to $2.5 billion. The latter is the regulatory clearance for trials related to the drugs for the treatment of solid tumors. Adagene will conduct the early stage trials along with Merck.
On February 1, investment advisory Morgan Stanley maintained an Overweight rating on Adagene Inc. (NASDAQ:ADAG) stock with a price target of $15. Analyst Matthew Harrison issued the ratings update.
At the end of the fourth quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $5 million in Adagene Inc. (NASDAQ:ADAG), compared to 5 the preceding quarter worth $10 million.
Just like KE Holdings Inc. (NYSE:BEKE), New Oriental Education & Technology Group Inc. (NYSE:EDU), and NIO Inc. (NYSE:NIO), Adagene Inc. (NASDAQ:ADAG) is one of the Chinese stocks that elite investors are flocking to as a government-sponsored crackdown against dual listed firms ends.
9. China Life Insurance Company Limited (NYSE:LFC)
Number of Hedge Fund Holders: 5
China Life Insurance Company Limited (NYSE:LFC) operates as a life insurance firm. On March 25, the company posted earnings for the 2021 fiscal year, reporting a net profit of around RMB 50 billion. The revenue over the year was more than RMB 824 billion, up around 2.5% compared to the revenue for the previous fiscal year. The gross written premiums of the firm also increased by 1% year-on-year, counting at RMB 18 billion. Renewal premiums were almost RMB 442 billion, up close to 6% year-on-year.
China Life Insurance Company Limited (NYSE:LFC) stock had nosedived at the beginning of the year after the CEO of the firm, Wang Bin, was investigated as part of a corruption probe by Beijing in a wider crackdown that also hurt other dual-listed Chinese stocks. Reports indicate that the crackdown is now ending.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in China Life Insurance Company Limited (NYSE:LFC) with 148,100 shares worth more than $1.2 million.
At the end of the fourth quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $48 million in China Life Insurance Company Limited (NYSE:LFC), compared to 8 the preceding quarter worth $52 million.
8. BeiGene, Ltd. (NASDAQ:BGNE)
Number of Hedge Fund Holders: 19
BeiGene, Ltd. (NASDAQ:BGNE) develops and markets therapies for cancer. On March 15, the company announced that Israel had approved Brukinsa, a drug developed by the firm for the treatment of B-cell lymphoma, for adult usage. The drug is already approved in around 45 markets around the world. In 2021, it generated global sales of almost $218 million for the Chinese biopharma firm. Earlier in March, the firm also got conditional approval for a solid tumor treatment in China for adults.
On March 25, Goldman Sachs analyst Ziyi Chen maintained a Buy rating on BeiGene, Ltd. (NASDAQ:BGNE) stock with a price target of $364.32, noting that the change of auditor and financial reporting from a China-based firm to a US-based one had removed regulatory overhangs on BeiGene and was a “significant positive” for the stock.
At the end of the fourth quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $4.8 billion in BeiGene, Ltd. (NASDAQ:BGNE), up from 16 in the preceding quarter worth $6.4 billion.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Baker Bros. Advisors is a leading shareholder in BeiGene, Ltd. (NASDAQ:BGNE) with 11.6 million shares worth more than $3.1 billion.
7. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 24
Li Auto Inc. (NASDAQ:LI) makes and sells electric sports utility vehicles. On April 1, the firm posted EV delivery numbers for March, reporting that it had delivered 11,034 models of the Li ONE in the month, up over 125% year-on-year. The figure takes the first quarter deliveries to around 31,700, up more than 152% compared to the deliveries in the first quarter of 2021. Since the debut of the Li ONE model in 2019, the company has so far delivered more than 155,000 Li ONE cars. Plans for a new car launch in mid-April are also underway.
On April 1, HSBC analyst Yuqian Ding initiated coverage of Li Auto Inc. (NASDAQ:LI) stock with a Buy rating and a price target of HK$135. Other investment advisors like China Renaissance and Morgan Stanley are also bullish on the stock.
At the end of the fourth quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Li Auto Inc. (NASDAQ:LI), up from 20 in the previous quarter worth $468 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Li Auto Inc. (NASDAQ:LI) with 7.4 million shares worth more than $237 million.
6. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders: 26
Yum China Holdings, Inc. (NYSE:YUMC) owns and runs franchise restaurants. Some of the famous brands it runs in China include KFC, Pizza Hut, and Taco Bell, among others. On March 17, the firm announced that it was expanding a share buyback plan by $1 billion. The latest increase takes the aggregate buy back to around $2.4 billion. The CEO of the firm, commenting on the plan, said that it reflected the “strength of the balance sheet and the ability to generate strong cash flow”.
A rise in COVID cases in China had pushed restaurant stocks like Yum China Holdings, Inc. (NYSE:YUMC) lower in recent days but the sentiment around the firm has improved after the Chinese central bank vowed to “keep markets stable”, an indication that a regulatory overhang over dual-listed Chinese firms was nearing an end.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm GuardCap Asset Management is a leading shareholder in Yum China Holdings, Inc. (NYSE:YUMC) with 8.7 million shares worth more than $434 million.
At the end of the fourth quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $842 million in Yum China Holdings, Inc. (NYSE:YUMC), compared to 30 in the previous quarter worth $832 million.
Along with KE Holdings Inc. (NYSE:BEKE), New Oriental Education & Technology Group Inc. (NYSE:EDU), and NIO Inc. (NYSE:NIO), Yum China Holdings, Inc. (NYSE:YUMC) is one of the Chinese stocks on the radar of institutional investors as growth stocks undergo a prolonged period of turmoil.
5. ZTO Express (Cayman) Inc. (NYSE:ZTO)
Number of Hedge Fund Holders: 28
ZTO Express (Cayman) Inc. (NYSE:ZTO) provides delivery and logistics services in China. The company posted earnings for the fourth quarter of 2021 on March 15, reporting earnings per share of $0.34, beating estimates by $0.01. The revenue over the period was $1.46 billion, missing targets by $50 million. The company also declared a special dividend of $0.25 per ADS. The adjusted profit for the firm grew by around 35% during the fourth quarter, a welcome break for the stock that had seen this figure in the red in five of the last seven quarters.
On March 8, Citi analyst Lu Xu maintained a Buy rating on ZTO Express (Cayman) Inc. (NYSE:ZTO) stock with a price target of $39,60, citing “defensiveness with better-than-peer cost advantage and attractive valuation” as the main catalysts for the shares.
At the end of the fourth quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.09 billion in ZTO Express (Cayman) Inc. (NYSE:ZTO), up from 20 the preceding quarter worth $1.01 billion.
4. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 29
XPeng Inc. (NYSE:XPEV) makes and sells smart electric vehicles. On April 1, the shares jumped 7.5% after the company posted stellar EV delivery numbers for March. The firm revealed that it had delivered 15,414 EVs in March, up 202% year-on-year and 148% month-on-month. The total number of vehicles delivered in the first quarter of 2022 stood at 34,561, up 159% year-on-year. The company has so far delivered more than 172,000 across the country.
On April 1, HSBC analyst Yuqian Ding initiated coverage of XPeng Inc. (NYSE:XPEV) stock with a Buy rating and a price target of $37, noting that the firm had built an autonomous driving setup in-house, a feat no other domestic competitor of the firm has matched so far. The analyst also hailed the system as one of the best available in China.
At the end of the fourth quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in XPeng Inc. (NYSE:XPEV), up from 25 the preceding quarter worth $657 million.
3. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 30
NIO Inc. (NYSE:NIO) develops and sells electric vehicles. Like other EV firms in China, Nio has also posted strong EV delivery numbers for March. The stock jumped 6% at the start of the month after the company reported a 37% year-on-year growth in March delivery numbers. In the first quarter of 2022, the firm delivered a record 25,768 EVs, up close to 29% compared to deliveries for the first quarter of 2021. The firm has so far delivered 192,838 vehicles across the world. It plans to launch deliveries for the new ET7 model this year too.
On March 25, Citi analyst Jeff Chung kept a Buy rating on NIO Inc. (NYSE:NIO) stock with a price target of $87, noting that the firm posted stronger than expected vehicle margins for the first quarter of the year.
At the end of the fourth quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $813 million in NIO Inc. (NYSE:NIO), the same as in the preceding quarter worth $1.1 billion.
2. New Oriental Education & Technology Group Inc. (NYSE:EDU)
Number of Hedge Fund Holders: 31
New Oriental Education & Technology Group Inc. (NYSE:EDU) provides private educational services across China. The stock has gained in the past few weeks after reports indicated that the founder of the firm, Yu Minhong, had purchased 3.2 million shares of Koolearn, an education firm owned by Oriental. The CEO has also pledged to embark on a plan to diversify and the firm plans to sell agricultural products online in the first part of this plan.
On March 9, investment advisory Daiwa upgraded New Oriental Education & Technology Group Inc. (NYSE:EDU) stock to Buy from Neutral. Analyst Candis Chan issued the ratings update. Other advisors like US Tiger are also bullish on the stock.
At the end of the fourth quarter of 2021, 31 hedge funds in the database of Insider Monkey held stakes worth $454 million in New Oriental Education & Technology Group Inc. (NYSE:EDU), compared to 32 in the preceding quarter worth $389 million.
In its Q3 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and New Oriental Education & Technology Group Inc. (NYSE:EDU) was one of them. Here is what the fund said:
“The quarter’s leading detractors were Chinese companies that were impacted by the CCP’s regulatory crackdown and liquidity concerns at property developer Evergrande. New Oriental Education & Technology Group Inc. (NYSE:EDU)—the largest provider of private educational services in China—moved sharply lower in July after policymakers implemented new rules which effectively turned Chinese tutoring companies into non-profits. Looking at New Oriental Education & Technology Group Inc. (NYSE:EDU), we closed our position as soon as government policy became clear and used the proceeds to allocate to existing holdings.”
1. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 34
KE Holdings Inc. (NYSE:BEKE) provides real estate services. Some of the services that the company provides, through online and offline offices, include new home sales, home rentals, home renovation, real estate financial solutions, and others. The stock has been given a major boost after the Chinese government promised it would take measures for financial stability after a lengthy crackdown against dual-listed firms that had led to large losses for Chinese firms listed in the United States.
On March 16, Morgan Stanley analyst Steven Tsai upgraded KE Holdings Inc. (NYSE:BEKE) stock to Overweight from Equal Weight with a price target of $16, noting that policy relaxation looked to set to boost the housing market and evidence of this was already evident in sales.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in KE Holdings Inc. (NYSE:BEKE) with 30 million shares worth more than $622 million.
In its Q3 2021 investor letter, Tao Value, an asset management firm, highlighted a few stocks and KE Holdings Inc. (NYSE:BEKE) was one of them. Here is what the fund said:
“As witnessed in the past quarter, the government intervention in Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE Holdings Inc. (NYSE:BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
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Disclosure. None. 10 Best Non-Tech Chinese Stocks to Buy Now is originally published on Insider Monkey.
