Below we present the list of 5 Best Chinese Stocks to Buy Now. For our methodology and a more comprehensive list please see 12 Best Chinese Stocks to Buy Now.
5. Trip.com Group Limited (NASDAQ:TCOM)
Number of Hedge Fund Shareholders: 41
There was a small rise in hedge fund ownership of Trip.com Group Limited (NASDAQ:TCOM) during Q1 and the Chinese travel services provider is about as popular with hedge funds as it’s been at any time over the past six years. Richard S. Pzena’s Pzena Investment Management has the largest long position in TCOM as of March 31, while Gregard Heje’s Kontiki Capital has greater than 18% 13F exposure to the stock.
Analysts are bullish on Trip.com Group Limited (NASDAQ:TCOM) ahead of the company’s first quarter earnings report, which is estimated to come out on June 26. Citi has a “90-day positive catalyst watch” on the stock in light of positive demand trends and believes the company has a decent chance to upend earnings estimates. TD Cowen also raised its price target on TCOM shares to $44 from $40 back in early March on signs that the company’s revenue has fully rebounded from Covid headwinds.
Artisan International Value Fund expects Trip.com Group Limited (NASDAQ:TCOM)‘s earnings to take flight in 2023 according to its Q4 2022 investor letter:
“Trip.com Group Limited (NASDAQ:TCOM), a Chinese online travel agency, was the second-largest contributor to return in 2022. Trip.com is the dominant supplier of online travel reservations and is expected to benefit from China’s loosening COVID-19 restrictions on both domestic and international travel. Management of Trip.com has wisely spent the COVID-19 lockdown period reinforcing and improving the company’s market position and reducing unnecessary costs. We expect earnings to boom over the next year as travel picks up. Other investors appeared to agree, pushing the share price up 42% in 2022.”
4. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Shareholders: 43
As with Vipshop Holdings Limited (NYSE:VIPS), which ranked 9th on this list, Baidu, Inc. (NASDAQ:BIDU) also experienced a massive surge in hedge fund ownership during Q1 of 2021. That surge was as equally short-lived as Vipshop’s was, and two years later, Baidu has less than half the hedge fund shareholders that it did then.
Baidu, Inc. (NASDAQ:BIDU)’s growth has slowed in recent quarters, with revenue rising by just 10% year-over-year in Q1 to $4.54 billion. However, the company is becoming quite a bit more profitable as it improves its operational performance, with non-GAAP net income climbing by 48% year-over-year to $834 million, while non-GAAP diluted earnings per ADS grew by 43% to $2.34.
Horos Asset Management took advantage of weakness in Baidu, Inc. (NASDAQ:BIDU) shares to load up them, as it detailed in its Q4 2022 investor letter:
“As I mentioned at the beginning of this quarterly letter, we took advantage of the meltdown in technology platforms to initiate new positions in companies in which we had already been shareholders in the past and whose valuation did not, until now, provide a sufficiently high margin of safety. Such is the case of PayPal and Baidu, Inc. (NASDAQ:BIDU).
In the case of Baidu, as many will know, it is known as the “Chinese Google”. The company has been the leading Internet search engine in the Asian country for years, which has given it a historically privileged position to monetize, through online advertising, a huge user base. However, the rise of two types of applications has called into question the sustainability of its business model. On the one hand, mobile social apps, such as ByteDance’s well-known TikTok, have emerged as a new model of online consumption, generating a new platform through which to monetize Internet users. On the other hand, even more disruptive in the long term, is the emergence of the so-called super apps: a sort of virtual Swiss Army knives that allow users to access many products and services without having to leave their interface at any time, making Baidu’s traditional search engine less attractive. In this field, Tencent (with its super app Weixin/WeChat), Alibaba (Alipay) and Meituan certainly stand out. These two factors have caused Baidu’s online advertising market share to drop from 17% in 2017 to less than 7% estimated for 2022.34 To this deterioration, we should add the collapse in market value of its stake in iQiyi (video platform controlled by Baidu) and its equity holdings such as Trip.com (hotel and flight platform) …” (Click here to read the full text)
3. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Shareholders: 59
JD.com, Inc. (NASDAQ:JD) has been one of hedge funds’ favorite Chinese stocks for several years. The company even ranked among the 30 most popular stocks among hedge funds back in 2020. Hedge fund ownership of JD has fallen by 38% since the end of 2020 however, though the stock still ranks as hedge funds’ third-favorite Chinese stock. Chase Coleman’s Tiger Global Management has been a longtime backer of JD.com, Inc. (NASDAQ:JD) and several other Chinese stocks and held a $1.06 billion stake in the company as of March 31, owning 24.1 million shares.
JD.com, Inc. (NASDAQ:JD) has a huge e-commerce footprint in China, boasting over 1,500 warehouses and employing more than 300,000 delivery personnel. The company grew net revenue at a 24% CAGR between 2017 and 2022, with its net services revenue growing at a 42% clip during that period. The boost in marketing and logistics services activity has helped make JD a more profitable company, as its non-GAAP net margin grew by 144 basis points year-over-year to 3.1% in Q1.
2. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Shareholders: 62
Unlike most of the stocks on this list, Chinese e-commerce company Pinduoduo Inc. (NASDAQ:PDD) has been rising in popularity among the smart money in recent quarters and hit an all-time high in hedge fund ownership during the first quarter of this year. Kerr Neilsen’s Platinum Asset Management and Daniel Gold’s QVT Financial added PDD to their 13F portfolios during Q1.
Pinduoduo Inc. (NASDAQ:PDD) has had a rough spring on the stock market, losing 28% of its value since the end of February. In March, the company’s app was removed from the Google Play Store after Alphabet found malware lurking in some versions of the app. The app for Pinduoduo’s Temu, which is the international expansion arm of the company, is still available.
Those concerns aside, Pinduoduo Inc. (NASDAQ:PDD) also missed top-line estimates with its latest earnings report, though revenue nonetheless grew by an impressive 46% year-over-year to $5.77 billion. Temu is in the midst of a push into the U.S. (you’ve probably seen some of its ads) and the e-commerce platform has been gaining some traction thanks to its rock-bottom prices and host of other customer-friendly policies. Temu was the most downloaded app in the United States from late-February to late-March, with 10 million downloads.
1. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Shareholders: 128
Topping the list of best Chinese stocks to buy now in a landslide is Alibaba Group Holding Limited (NYSE:BABA), which has more than twice as many smart money investors as the runner-up. Alibaba did experience a big decline in hedge fund ownership in the second-half of 2021 and remains well off its all-time highs, but money managers have been buying back into the company in recent quarters.
Alibaba Group Holding Limited (NYSE:BABA) is undergoing an organizational restructuring which the company believes will allow it to be more efficient and could lead to some of the new business units being spun off as separate public companies. That provides some intriguing potential catalysts for Alibaba investors in the future, which likely explains why hedge funds have been adding it back to their portfolios.
L1 Long Short Fund believes Alibaba Group Holding Limited (NYSE:BABA)’s organizational restructuring will help unlock some of its sum-of-the-parts valuation discount, as it revealed in its Q1 2023 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) (Long +16%) shares performed strongly based on favourable sentiment surrounding China’s re-opening and indications from Chinese authorities that the prolonged restructuring process of Alibaba/Ant Financial was finally drawing to a close. The company remains a high-quality business with leading positions in both eCommerce and Public Cloud. We exited our position in January at around US$116 per share with the shares having rallied more than 90% since their early November lows and our China re-opening catalyst having played out. We subsequently re-entered the position in March with the shares having pulled back and with the company announcing a new organisational and governance structure. Alibaba has announced plans to split into six major business groups – Cloud Intelligence, Taobao Tmall, Local Services, Global Digital, Cainiao Smart Logistics and Digital Media and Entertainment Group. Each of these groups will be managed independently (separate CEO and board) and have the flexibility to raise external capital and potentially pursue separate IPOs. We believe this announcement is a strong catalyst to unlock the inherent sum-of-the-parts valuation discount in the company.”
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