In this article, we discuss the 9 China rebound stocks to buy according to Jim Cramer.
The Chinese government has slowly started easing coronavirus-related restrictions on business and travel as new cases decrease in the country. However, under the Zero-COVID policy, the threshold for easing a lockdown remains zero positive cases in a particular area for seven consecutive days. A robust testing regime monitors the effective implementation of this policy. These curbs are stricter than any other in the world as Chinese President Xi Jinping aims to balance the needs of the economy and social stability.
The reopening of China has resulted in a flurry of activity at the stock market, pushing up the shares of companies with large exposure to the country. Some of the stocks that legendary investor Jim Cramer has been monitoring in this context include Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and The Walt Disney Company (NYSE:DIS). Cramer believes that the US markets are going to have a “new leg up from China” in the coming weeks as “pent-up” demand increases sales for American restaurants, tech, and car firms in the Asian country.
Cramer has also stressed that due to the 2020 virus lockdowns, “no one has sold anything in China” and that the country had “a total shutdown” unlike the US, which places firms with large exposure to the country in a much better position to benefit from the reopening than they did in the US. Cramer noted that US firms would do “a lot more business in China” in the coming quarter. The former Goldman Sachs employee even highlighted the rally in casino stocks to drive his point home, pointing to reopening reports from Macau.
Our Methodology
These were picked keeping in mind the latest calls that Cramer made on these equities during his appearances on news platform CNBC. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.
China Rebound Stocks to Buy According to Jim Cramer
9. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders: 27
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. During an appearance on CNBC in late June, Jim Cramer identified Yum China Holdings, Inc. as one of the stocks that could benefit from a post-lockdown rise in restaurant spending by young people in China as they emerged from months of lockdown. Cramer drew a parallel to the same happening in the US in the spring of 2021.
Yum China Holdings, Inc. posted earnings for the first quarter of 2022 on May 3, reporting a revenue of $2.67 billion, up more than 4% compared to the revenue over the same period last year and beating analyst expectations by $70 million.
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., with 8.9 million shares worth more than $371 million.
Just like Apple Inc., Tesla, Inc., and The Walt Disney Company, Yum China Holdings, Inc. is one of the stocks on the radar of elite investors.
8. Wynn Resorts, Limited (NASDAQ:WYNN)
Number of Hedge Fund Holders: 32
Wynn Resorts, Limited (NASDAQ:WYNN) is a Las Vegas-based corporation that owns and operates luxury hotels and casinos. Although virus cases in Macau have surged in recent weeks, the Chinese government has extended a special COVID policy in the region by allowing casinos to remain open. The area has not had a large-scale COVID outbreak since October 2021 and Jim Cramer has placed it among a group of casino stocks that stand to gain as virus restrictions in China are further eased.
On May 11, investment advisory Deutsche Bank maintained a Buy rating on Wynn Resorts, Limited stock and lowered the price target to $92 from $123. Analyst Carlo Santarelli issued the ratings update.
At the end of the first quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $269 million in Wynn Resorts, Limited, up from 29 the preceding quarter worth $260 million.
In its Q3 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Wynn Resorts, Limited was one of them. Here is what the fund said:
“In the most recent quarter, we exited the Fund’s holdings in Wynn Resorts, Limited due to: (i) ongoing COVID-19-related travel restrictions in China, Macau, and Singapore; and (ii) the Macau government’s announcement to tighten its casino regulatory oversight.”
7. Las Vegas Sands Corp. (NYSE:LVS)
Number of Hedge Fund Holders: 39
Las Vegas Sands Corp. (NYSE:LVS) owns and runs integrated resorts. During an appearance on Squawk on the Street, aired by CNBC, the journalist investor highlighted the recovery stories from easing of virus restrictions in China. He placed Las Vegas Sands Corp. among a basket of casino stocks that had posted significant gains in the last week of June, especially on the back of reports that Macau casinos were filling up again. Las Vegas Sands Corp. gets nearly two-thirds of its business from the Chinese city.
On June 29, investment advisory Barclays initiated coverage of Las Vegas Sands Corp. stock with an Overweight rating and a price target of $39. Analyst Brandt Montour issued the ratings update.
At the end of the first quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $749 million in Las Vegas Sands Corp., up from 34 the preceding quarter worth $880 million.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Las Vegas Sands Corp. was one of them. Here is what the fund said:
“Following a 50%-plus decline in the share price of Las Vegas Sands Corp. 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 Corp. maintains a liquid and investment grade balance sheet and is currently valued at a significant discount to our assessment of replacement cost.”
6. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Holders: 59
MGM Resorts International (NYSE:MGM) is a Las Vegas-based hospitality and entertainment firm that runs several destination resorts. In late June, the former hedge fund manager appeared on CNBC to claim that “China was coming back” and with “people going out again” in the country, stocks like MGM Resorts International, which owns and runs a lot of business in Macau, would stand to gain. Cramer also noted that casino stocks were “barely up” in the context of this investment thesis.
On June 28, JMP Securities analyst Jordan Bender initiated coverage of MGM Resorts International stock with an Outperform rating and a price target of $55, noting the firm could warrant a premium valuation in the coming months due to “higher internet gaming mix verses comps and diversified cash flows”.
At the end of the first quarter of 2022, 59 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in MGM Resorts International, up from 55 the preceding quarter worth $3.1 billion.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and MGM Resorts International was one of them. Here is what the fund said:
“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.”
5. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 58
Starbucks Corporation (NASDAQ:SBUX) is a specialty coffee firm. Jim Cramer called on investors to buy Starbucks Corporation during an appearance on CNBC on June 28, inviting people to remember that Americans were really “pent-up to go places” after COVID lockdowns last year. He said the same would happen in China, singling out Starbucks Corporation as one of the firms that would benefit from this theme. Starbucks Corporation operates over 5,000 stores in mainland China.
On May 9, Deutsche Bank analyst Brian Mullan maintained a Buy rating on Starbucks Corporation stock and lowered the price target to $103 from $116, noting there was uncertainty around the shares but the narrative appeared to be turning.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Starbucks Corporation, with 8.2 million shares worth more than $749 million.
In addition to Apple Inc., Tesla, Inc., and The Walt Disney Company, Starbucks Corporation is one of the stocks that hedge funds have their eye on.
In its Q1 2022 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Starbucks Corporation was one of them. Here is what the fund said:
“We trimmed our positions in most of these companies in 1Q 2022 and sold our stake in Starbucks after a 12+ year holding period. In our view, Starbucks Corporation continues to be in a unique position to serve its customers who value the quality of its products and the convenient way they can be purchased. At the same time, Starbucks’ business is maturing in western markets, and its employee and store-related costs are growing, which should lead to slower earnings growth than we would prefer and further P/E multiple compression. We believe we have better opportunities as we continue to assess the impact of these issues for Starbucks Corporation.”
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 67
NIKE, Inc. (NYSE:NKE) makes and sells athletic products. Jim Cramer has backed the company to smash market estimates on earnings in the coming months, predicting that the earnings call of the firm in the next quarter will be “very different” from the recent one in which the guidance disappointed analysts. Cramer has said that those who had sold NIKE, Inc. would “regret it” and identified the FIFA World Cup and China reopening as some of the growth catalysts for the stock in the summer.
On June 29, Barclays analyst Adrienne Yih maintained an Overweight rating on NIKE, Inc. stock and lowered the price target to $125 from $140, noting the firm was battling overall consumer slowdown and persisting macro pressures.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc., with 6.7 million shares worth more than $905 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NIKE, Inc. was one of them. Here is what the fund said:
“NIKE, Inc. 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. is also still under indexed to the women’s category, which we see as a significant ongoing catalyst.”
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Tesla, Inc. markets electric vehicles and clean energy solutions. In mid-May, Cramer highlighted that the market was placing “too much fear” around names like Tesla, Inc. in light of their dependence on China. Cramer noted that the firm had delivered during the pandemic and advised investors to stick with the company. He predicted that the firm would do a lot more business in China as virus restrictions were eased and pent-up travel demand increased car sales.
On June 30, Goldman Sachs analyst Mark Delaney maintained a Buy rating on Tesla, Inc. stock with a price target of $1,000, underlining that the fast-charging network of the firm was a key asset of the company with a $3 billion revenue opportunity.
At the end of the first quarter of 2022, 80 hedge funds in the database of Insider Monkey held stakes worth $11 billion in Tesla, Inc., compared to 91 in the previous quarter worth $12 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC has to say about Tesla, Inc. in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc.. At its Battery Day last year, Tesla, Inc. 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.”
2. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 113
The Walt Disney Company operates as an entertainment company. During an appearance on CNBC on June 28, Cramer said that people wanted to focus on everything that was wrong with the company and even though it had a bad month, he backed the company to emerge as one of the biggest winners from the China reopening in the coming months. Cramer even referred to the firm as one of the “most-hated” stocks in the world but one he thought would perform “the best” in the coming months.
On June 30, Morgan Stanley analyst Benjamin Swinburne maintained an Overweight rating on The Walt Disney Company stock and lowered the price target to $125 from $170, noting that the target was lowered due to the loss of the IPL cricket rights in India and risk of weak consumer demand.
At the end of the first quarter of 2022, 113 hedge funds in the database of Insider Monkey held stakes worth $5.1 billion in The Walt Disney Company, up from 111 the preceding quarter worth $6.9 billion.
In its Q1 2022 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and The Walt Disney Company was one of them. Here is what the fund said:
“The war in Ukraine has given new urgency to the question of whether globalization has reached a tipping point and if the familiar web of decentralized, just-in-time, global supply chains will be a casualty of the inward turn dividing countries into competing trading blocs. It is probably too soon to know. We sold The Walt Disney Company, due to some concerns about the increasing capital intensity of its business amid signs of rising competition and slowing growth in streaming media consumption.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Apple Inc. is a consumer electronics firm. Cramer has dismissed concerns around supply-chain problems that the company is facing in China, noting that the firm was among a handful of American companies with “pricing power”. He also advised investors to stick with “profitable, recession-proof” stocks in the present market environment. Cramer noted that the company was one of the only tech giants that would benefit the most from a China reopening in the coming weeks.
On July 1, JPMorgan analyst Samik Chatterjee maintained an Overweight rating on Apple Inc. stock with a price target of $200, noting the near-term fortunes of the company remained resilient despite macro concerns on the economy.
At the end of the first quarter of 2022, 131 hedge funds in the database of Insider Monkey held stakes worth $182 billion in Apple Inc., compared to 134 in the previous quarter worth $186 billion.
In its Q1 2022 investor letter, Weitz Investment Management highlighted a few stocks and Apple Inc. was one of them. Here is what the fund said:
“Changes to the Apple Inc. mobile operating systems have temporarily impacted growth of Meta’s advertising business just as the company’s investments in Instagram’s “Reels” feature ramp ahead of full monetization. (Shareholders can read research analyst Jon Baker’s in-depth discussion of current events impacting Meta and reasons why we’re optimistic about the company in our recent Analyst Corner feature.) CoreCard (formerly Intelligent Systems) struggled early in the fiscal year to hire and train staff to handle growth from new and existing clients. Lately, Apple-related headlines also took a bite out of CoreCard shares, as reports suggest Apple Inc. is exploring a transition of its credit card and other financial services to internally built solutions. Such a move would create revenue headwinds for its partners, which CoreCard is widely believed to be. We are monitoring these developments and stress-testing our model accordingly.”
You can also take a peek at 10 Russell 2000 Basic Materials Dividend Stocks to Buy and 10 Utilities Stocks with Over 3% Dividend Yield.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Financial Services Dividend Stocks with Over 4% Yield
- 15 Best Momentum Stocks To Invest In
- 10 Cheap Hemp Stocks Redditors are Buying
This article is originally published at Insider Monkey.
