In this article, we discuss the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital.
Serving as the managing director and primary owner, Jonathan Guo is the Founder of Yiheng Capital. After earning his B.S at the California Institute of Technology and his M.B.A from Harvard Business School, Jonathan Guo began his long career in technology, investment banking and finance. Prior to founding Yiheng Capital, Guo worked as a senior software development manager at Oracle Corporation, and later as an analyst for MSD Capital in their Long/Short Equity Group. Jonathan Guo also served as a senior analyst for First Q Capital, after which he served as an investor and analyst at Brahman Capital. He founded Yiheng Capital a few months after leaving Brahman Capital’s San Francisco office.
According to the most recent 13F filings, Yiheng Capital, as an investment firm, manages more than $2.48 billion in assets. Yiheng Capital’s portfolio is diversified across 5 key sectors, with the Consumer Discretionary sector being the largest one. The fund focuses most of its investments in China, with a majority of the companies in the fund’s portfolio being large-cap companies with stocks scaling up to more than $10 billion in market capitalization, making up 22% of the fund’s total value.
Some of the top stocks present in the investment portfolio of Yiheng Capital at the end of the second quarter of 2021 include Bilibili Inc. (NASDAQ:BILI), JD.com, Inc. (NASDAQ:JD) and TransDigm Group Incorporated (NYSE:TDG), among others.
Our Methodology
With this background in mind, let us now look towards the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital. We made use of Yiheng Capital’s 13F portfolio for the second quarter for this analysis.
Why should we pay attention to Jonathan Guo’s stock picks? 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 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.
10 Chinese Stocks to Buy According to Jonathan Guo’s Yiheng Capital
10. Tuniu Corporation (NASDAQ:TOUR)
Guo’s Stake Value: $14.53 million
Percentage of Jonathan Guo’s 13F Portfolio: 0.58%
Number of Hedge Fund Holders: 5
Tuniu Corporation (NASDAQ:TOUR) is a leading online travel agency based in Nanjing, China. Some of the services the company provides include packaged tours, accommodation reservation, airline and railway ticketing, car rentals, and corporate travel. Ranked 10th on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Tunio Corporation has a market capitalization of $173.05 million.
Jonathan Guo’s Yiheng Capital currently holds over 6.1 million shares of Tuniu Corporation, amounting to around $14.53 in worth and representing 0.58% of the fund’s investment portfolio. For the second quarter of 2021, the company reported net revenues of $24.89 million, representing a year-over-year increase of 373% from the corresponding period in 2020, with packaged tours accounting for around 79% of the net revenues for the quarter.
Just like Bilibili Inc., JD.com, Inc. and TransDigm Group Incorporated, Tuniu Corporation is one of the top stock picks in Jonathan Guo’s portfolio.
9. Hello Group Inc. (NASDAQ:MOMO)
Guo’s Stake Value: $21.2 million
Percentage of Jonathan Guo’s 13F Portfolio: 0.85%
Number of Hedge Fund Holders: 24
Hello Group Inc. (NASDAQ:MOMO) operates as a mobile-based social networking platform. Based in Beijing, the company operates MOMO, a social media platform that provides a short-video and live-video platform for its 115.6 million monthly active users (MAUs). Ranked 9th on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Hello Group Inc. has a market capitalization of $2.24 billion.
Jonathan Guo’s Yiheng Capital currently holds 1.38 million shares of Hello Group Inc., amounting to over $21.2 million in worth and accounting for 0.85% of the fund’s portfolio. On August 26, the company released its quarterly earnings for the second quarter of 2021, with reported earnings per share at $0.39, surpassing estimates of $0.32 by $0.07. The company also reported revenues of $566.5 million, beating estimates by $7.21 million.
Just like Bilibili Inc., JD.com, Inc. and TransDigm Group Incorporated, Hello Group Inc. is one of the top stock picks in Jonathan Guo’s portfolio.
8. AiHuiShou International Co. Ltd. (NYSE:RERE)
Guo’s Stake Value: $26.16 million
Percentage of Jonathan Guo’s 13F Portfolio: 1.05%
Number of Hedge Fund Holders: 8
AiHuiShou International Co. Ltd. (NYSE:RERE) is a leading technology-driven pre-owned consumer electronics transactions and services platform in China. Ranked 8th on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, AiHuiShou International Co. Ltd. has a market capitalization of $2.01 billion.
Jonathan Guo’s Yiheng Capital currently owns 1.75 million shares of AiHuiShou International Co. Ltd., amounting to over $26.16 million in worth and representing 1.05% of the fund’s portfolio. For the second quarter of 2021, the company reported a total net revenue of $290 million, which represented a year-over-year increase of 56.2%
Out of the hedge funds being tracked by Insider Monkey’s database, New York-based investment firm Tiger Global Management LLC is a leading shareholder in AiHuiShou International Co. Ltd with 2.75 million shares worth more than $41.1 million.
Just like Bilibili Inc., JD.com, Inc. and TransDigm Group Incorporated, AiHuiShou International Co. Ltd. is one of the top stock picks in Jonathan Guo’s portfolio.
7. Hollysys Automation Technologies Ltd. (NASDAQ:HOLI)
Guo’s Stake Value: $44.31 million
Percentage of Jonathan Guo’s 13F Portfolio: 1.78%
Number of Hedge Fund Holders: 19
Hollysys Automation Technologies Ltd. (NASDAQ:HOLI) is a leading provider of automation and control technologies in China, with overseas operations in eight other countries and regions throughout Asia. Ranked 7th on our list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Hollysys Automation Technologies Ltd. has a market capitalization of $1.29 billion
At present, Jonathan Guo’s Yiheng Capital holds more than 2.97 million shares of Hollysys Automation Technologies Ltd., worth over $44.31 million and accounting for 1.78% of the fund’s total portfolio. For the second quarter of 2021, the company reported earnings per share at $0.53, surpassing forecast estimates by $0.04.
Davis Global Fund, in their Q4 2020 investor letter, mentioned Hollysys Automation Technologies Ltd.. Here is what the fund had to say:
“Hollysys Automation (HOLI) has been a long-term holding in Davis Global Fund, but is still unfamiliar to most investors. Hollysys is a Chinese manufacturer of automation equipment for power plants, petrochemical facilities and factories, as well as safety and control systems for high-speed rail and subway cars. The company has attractive growth prospects in a handful of industrial automation niches, where it has built a loyal customer base over the years, as well as in the rapidly-growing high-speed rail market in China. While Hollysys has seen some order delays during the pandemic, it is a provider of essential equipment to keep the Chinese economy running and should resume growing once order cycles return to their normal cadence. HOLI is one of the cheapest stocks in the Fund, currently trading for 8–9x owner earnings, and if one takes into account the roughly $0.6 billion of net cash the company has on its balance sheet (equal to well over half of the company’s market cap), HOLI is trading under 5x owner earnings.
So why is it so cheap? Part of Hollysys’ challenge is that while it is one of the top industrial automation firms in China, it is still relatively unknown to the investing public in the U.S., where HOLI is listed. The recent push to de-list U.S.-traded Chinese companies has led to worries that it could have an adverse impact on HOLI’s trading liquidity and even force a de-listing in three years, if regulators do not find a compromise. This could make for a bumpy ride in the capital markets and force the company to seek out a more receptive trading venue (i.e., one closer to its end market of China), but we believe there is underlying value in Hollysys that will eventually be more fully recognized, regardless of where the stock trades. The value is being driven by the earnings of the business, rather than the exchange it is being traded on.”
6. Niu Technologies (NASDAQ:NIU)
Guo’s Stake Value: $73.8 million
Percentage of Jonathan Guo’s 13F Portfolio: 2.97%
Number of Hedge Fund Holders: 13
Niu Technologies (NASDAQ:NIU) is an electric scooter company headquartered in Changzhou, China, that designs, manufactures and sells high-performance electric motorcycles, scooters and bicycles. Ranked 6th on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Niu Technologies has a market capitalization of $1.93 billion.
Jonathan Guo’s Yiheng Capital presently holds over 2.26 million shares of Niu Technologies, amounting to more than $73.8 million in worth and representing 2.97% of the fund’s portfolio. The company issued its quarterly earnings report for the second quarter of 2021 on August 16, with reported earnings per share at $0.20, beating estimates of $0.16 by $0.04. The company also reported revenues of $145.92 million, falling short of the estimates by $11.45 million.
Out of the hedge funds being tracked by Insider Monkey’s database, UK-based investment firm Aubrey Capital Management is a leading shareholder in Niu Technologies with 450,200 shares worth more than $14.69 billion.
Just like Bilibili Inc., JD.com, Inc. and TransDigm Group Incorporated, Niu Technologies is one of the top stock picks in Jonathan Guo’s portfolio.
5. Tal Education Group (NYSE:TAL)
Guo’s Stake Value: $145.7 million
Percentage of Jonathan Guo’s 13F Portfolio: 5.86%
Number of Hedge Fund Holders: 39
Tal Education Group (NYSE:TAL) is a holding company that engages in the provision of after-school tutoring programs for primary and secondary school students. Its services are delivered through premium services, including one-on-one tutoring and online course offerings. Ranked fifth on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Tal Education Group has a market capitalization of $3.21 billion.
As of the second quarter of 2021, Jonathan Guo’s Yiheng Capital holds over 5.77 million shares of Tal Education Group, amounting to $145.7 million in worth and accounting for 5.86% of the fund’s portfolio. For the second quarter of 2021, the company reported earnings per share at $0.08, missing estimates of $0.11 by $0.03. In addition, the company also reported revenues at $1.10 billion, falling short of the estimated revenues by $21.40 million.
Out of the hedge funds being tracked by Insider Monkey’s database, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Tal Education Group with 2.28 million shares worth more than $57.59 million.
In the Q2 2021 investor letter of Tao Value, the fund mentioned TAL Education Group. Here is what the fund said:
“On detracting side, our largest loss came from our recent new education positions, TAL. New legislation on both private K9 education & private tutoring materialized in the past quarter, and they turned out to be irrationally harsher & broader than anticipated. When such worst scenario fold out, the prospects of the company undoubtably has changed significantly. Although I believe that market overreacted on this company, it appears that I have made a mistake underestimating the regulatory impact and picking it up too soon. Our position sizes reflected my evaluation of the risk, and I decide to stay put.”
4. Huazhu Group Limited (NASDAQ:HTHT)
Guo’s Stake Value: $162.1 million
Percentage of Jonathan Guo’s 13F Portfolio: 6.52%
Number of Hedge Fund Holders: 27
Huazhu Group Limited (NASDAQ:HTHT) is a hotel management company based in Shanghai, China. The company provides services ranging from hotel leasing, direct hotel operation, and co-development services. Ranked fourth on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Huazhu Group Limited has a market capitalization of $15.24 billion.
At present, Jonathan Guo’s Yiheng Capital holds over 3.07 million shares of Huazhu Group Limited worth $162.1 million, representing 6.52% of the fund’s total portfolio. On August 24, the company released its financial report for the second quarter of 2021, with reported revenues at $556 million, an increase of 84% on a year-over-year basis, though it missed the estimated revenue mark by $6.99 million.
Out of the hedge funds being tracked by Insider Monkey’s database, Australia-based investment firm Platinum Asset Management is a leading shareholder in Huazhu Group Limited with over 1.79 million shares worth more than $94.6 million.
3. JD.com, Inc. (NASDAQ:JD)
Guo’s Stake Value: $178.49 million
Percentage of Jonathan Guo’s 13F Portfolio: 7.18%
Number of Hedge Fund Holders: 76
JD.com, Inc. is a company that provides retail infrastructure and operates an online e-commerce marketplace headquartered in Beijing, China. Ranked third on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, JD.com, Inc. has a market capitalization of $121.83 billion.
Jonathan Guo’s Yiheng Capital currently holds 2.23 million shares of JD.com, Inc., amounting to $178.49 million in worth and accounting for 7.18% of the fund’s portfolio. The company issued its quarterly earnings report for the second quarter of 2021 on August 23, with reported earnings per share at $0.45, surpassing estimates by $0.10. Additionally, the reported revenue came at $39.15 billion, beating forecast estimates by $962.80 million.
On August 24, investment advisory Mizuho maintained a Buy rating on JD.com, Inc. stock but lowered the price target to $85 from $95, underlining that regulation pressures in China would have a little impact on the company.
Out of the hedge funds being tracked by Insider Monkey’s database, New York-based investment firm D1 Capital Partners is a major shareholder in JD.com, Inc. with over 15.5 million shares worth more than $1.2 billion.
In the Q2 2021 investor letter of Arisaig Partners, the fund mentioned JD.com, Inc.. Here is what the fund had to say:
“JD.com, for example, continues to display impressive operating momentum, with sales on track to grow around 30% this year by our estimates. Looking longer term, this company is making a credible claim to be the dominant player in Chinese grocery ecommerce, an enormous chunk of overall consumption in China, and the last one yet to move online in a big way. We think that JD has a clear advantage over rivals here thanks to its integrated and fully self-managed logistics capabilities. Whereas an offline big box retailer might have 10-20,000 SKUs, JD offers 8 million. 90% of orders fulfilled by JD Logistics can be delivered on the same day or the next day to 500 million customers. The fact that JD has just 30 days of inventory tells us that this is a highly-optimised fulfilment chain. It is very hard to be both fast and efficient, and in order to achieve this it is necessary to know what inventory to hold in which warehouse, and when to hold it (“right place, right time, right person”), a highly information-intensive challenge. The only other retailer that comes close to being able to manage that level of complexity is Amazon, and indeed these are capabilities that are very hard to replicate, taking decades of painstaking investment, trial and error testing, and data accumulation.
Moreover, far from being some sort of ‘victim’, this company is most likely a beneficiary of tighter regulation in this sector. A recurrent message running through JD’s recent investor day was that of “deep purpose”, the objective being to create shared value for a broader ecosystem of customers, merchants and employees. As we describe in the next section on “Navigating China”, this form of alignment with the strategic objectives of the government is a very China-specific way of conceptualising ESG, and essential for all businesses that operate in this country to get right…” (Click here to see the full text)
2. Noah Holdings Limited (NYSE:NOAH)
Guo’s Stake Value: $313.7 million
Percentage of Jonathan Guo’s 13F Portfolio: 12.62%
Number of Hedge Fund Holders: 17
Noah Holdings Limited (NYSE:NOAH) is a leading wealth management service provider in China. Catering primarily to high net worth investors, the company offers comprehensive one-stop advisory services on global investment and asset allocation. Ranked second on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital, Noah Holdings Limited has a market capitalization of $2.16 billion.
According to the 13F Filings for the second quarter of 2021, Jonathan Guo’s Yiheng Capital holds 6.64 million shares of Noah Holdings Limited, worth $313.7 million and representing 12.62% of the fund’s portfolio. For the second quarter of 2021, Noah Holdings Limited reported revenues of $139.3 million, a 20.3% increase from the corresponding period in 2020.
Out of the hedge funds being tracked by Insider Monkey’s database, New York-based investment firm, Tiger Pacific Capital is a leading shareholder in Noah Holdings Limited with 2.64 million shares worth more than $124.97 million.
1. Bilibili Inc. (NASDAQ:BILI)
Guo’s Stake Value: $591.7 million
Percentage of Jonathan Guo’s 13F Portfolio: 23.81%
Number of Hedge Fund Holders: 47
Bilibili Inc. is an online entertainment platform featuring videos, live broadcasting, and mobile games. The company has a market capitalization of $28.36 billion, and is ranked first on the list of the 10 Chinese stocks to buy according to Jonathan Guo’s Yiheng Capital.
On August 19, Bilibili Inc. released its earnings report for the second quarter of 2021. The company reported earnings per share at -$0.45, beating the expectations by $0.11. In addition, the revenue reported was $692.14 million, an increase of 82.22% on a year-over-year basis, surpassing the forecast estimates by $28.86 million.
Out of the hedge funds being tracked by Insider Monkey’s database, UK-based investment firm, Aubrey Capital Management is a leading shareholder in Bilibili with 219,670 shares worth more than $26.76 billion.
In the Q2 2021 investor letter of Baillie Gifford, the fund mentioned Bilibili Inc.. Here is what the fund said:
“One of the most important cognitive elements, is our recognition that consumer patterns and attitudes are evolving increasingly rapidly and with ever greater amplitude. While the human needs for self-actualisation, esteem and belonging are innate and immutable, they are being expressed in new ways. Tastes are being shaped by social groups who are culturally similar but geographically distant. The lines between the physical and digital-self continue to blur.
To those in the throes of middle age, this can be discombobulating. I profess to unease when my daughter recently earned five pounds stacking logs – only to ‘blow’ this pocket money on a pair of virtual Gucci sneakers for her online Roblox character. But we need to be imaginative about the possible size of the market for virtual luxury in the long term and it’s encouraging to observe that Kering is already on the front foot. It is also amply clear that the experienced Long Term Global Growth investors who predate Generations Y & Z, need the help of colleagues in understanding the mood and aspirations of a new cohort of conscious consumers. In this sense, the multigenerational and multicultural dynamic within the LTGG team (and indeed across the broader Baillie Gifford investment floor), has never seemed more important…” (Click here to see the full text)
You can also take a look at 20 Best Places to Invest in Rental Property in 2021 and 10 Best Robinhood Stocks Under $20.
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This article is originally published at Insider Monkey.
