George Soros, Son Jonathan Both Betting On China

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George SorosSoros Fund Management and his son Jonathan SorosJS Capital are among the more than 700 hedge funds that we track. According to their 13F filings with the U.S. Securities and Exchange Commission for the period of March 31, and after scouring through the submitted data, we realized that both funds are betting on China. Although the two funds have substantially different public equity portfolio values, their investment in select China-based companies shows strong expectation for the Asian nation’s growth. At the end of the first quarter of 2015, the senior Soros’ fund had $10.16 billion in public equity portfolio value and more than $28 billion in assets under management, while the junior Soros had $394.76 million worth of stocks in his public equity portfolio. Our analysis revealed that the two have some similarities in their China-based stock picks. These are Vipshop Holdings Ltd – ADR (NYSE:VIPS), Alibaba Group Holding Ltd (NYSE:BABA), and International, Ltd.  (ADR) (NASDAQ:CTRP).

George Soros

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 145% over the last 34 months, which is more than 85 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

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At the end of the first quarter of 2015, Soros Fund Management owned 3.80 million shares of  Vipshop Holdings Ltd – ADR (NYSE:VIPS) with a market value of $111.93 million while his son’s JS Capital held 400,000 shares of the stock with a market value of $11.78 million. The company is a Chinese online retailer that sells branded products through flash sales, in which specific products are provided in limited quantities and sold within a specified period at deep discounts. The company’s performance in the first quarter of 2015 was quite impressive, posting a greater than 40% gain for the period. The number of hedge funds out of the ones we track that were invested in Vipshop Holdings Ltd – ADR (NYSE:VIPS) increased to 48, from 47 at the end of the fourth quarter of 2014. It was not only an increase in the number of hedge funds but also the invested capital, which jumped to $3.22 billion by March 31 from $2.16 billion at the end of the previous quarter. Other hedge funds that also had stakes in the stock at the end of the first quarter were Chase Coleman‘s Tiger Global Management LLC with 15.95 million shares, and Stephen Mandel’s Lone Pine Capital with 10.94 million shares.

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