Kylin Management’s Top Picks: How Ted Kang Outperforms the Market with Asian, Tech & Financial Stocks

Kylin Management is a New York-based hedge fund founded by Ted Kang, a former Tiger Management employee, in December of 2005. The firm manages approximately $2.5 billion in assets, and last disclosed with the SEC an equity portfolio comprising nine long positions valued at more than $829 million as of December 31. Around 40% of the fund’s equity portfolio is amassed by technology stocks, followed by financial and consumer discretionary companies, which represent some 34% and 24% of the equity portfolio, respectively. According to our calculations, during the fourth quarter, the fund’s five long positions in companies with market caps above $1.0 billion delivered a weighted average return of 14.1%, based on the size of those positions at the beginning of the quarter. For 2015, the firm’s qualifying stock picks posted a weighted average return of 19.8%, making it one of the top-20 best performing funds in our database. In this article, we’ll take a look at Kylin Management’s top picks heading into 2016.

Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks (read more details here).

#5. 58.com Inc (ADR) (NYSE:WUBA)

– Shares Owned by Kylin Management as of December 31: 749,968

– Value of Holding as of December 31: $49.46 Million

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58.com Inc (ADR) (NYSE:WUBA) represents a new position initiated by Kylin during the fourth quarter . The stock has lost almost 19% in value since the beginning of 2016. A couple of weeks ago, billionaire Chase Coleman‘s Tiger Global Management also disclosed a new position, comprising 8.84 million shares, in the online marketplace operator. Last Thursday, the company posted a fourth quarter net loss of $0.35 per share, considerably better than expected, on revenue of $255.3 million, up by 218.2% year-over-year, and $12.2 million above consensus. However, the strong results were overshadowed by weak guidance for the first quarter and the resignation of co-chairman Mark Yang.

#4. Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP)

– Shares Owned by Kylin Management as of December 31: 1.74 Million

– Value of Holding as of December 31: $80.64 Million

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Despite a 19% reduction in Kylin’s stake over the fourth quarter, Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) maintained the fourth spot in the fund’s top picks list. Even more bullish on the stock seemed Ken Fisher’s Fisher Asset Management, which last disclosed ownership of 8.83 million shares – after more than having doubled its exposure during the fourth quarter. The opposite was the case of Andreas Halvorsen’s Viking Global, which, on February 16, said it had trimmed its stake from 3.76 million shares to 470,893 shares. The shares have tumbled more than 10% year-to-date. The company will report its fourth quarter financial results on March 17, and analysts currently expect the company to report flat earnings, up from the net loss of $0.13 per share seen a year ago, on revenue of $434.35 million, up by more than 40% year-over-year.

On the next page we will take a look into Kylin Management’s top three picks heading for 2016.

#3. JD.Com Inc (ADR) (NASDAQ:JD)

– Shares Owned by Kylin Management as of December 31: 3.68Million

– Value of Holding as of December 31: $118.98 Million

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JD.Com Inc (ADR) (NASDAQ:JD) also kept the same spot in Kylin’s 13F as at the end of the third quarter, even though the fund trimmed its position by 30% over the fourth quarter, while the stock gained 23.8%. However, year-to-date the shares have fallen more than 20%. Another shareholder betting on JD.Com is Tiger Global Management, which doubled its exposure to the company to 119.23 million shares, as disclosed in a recent filing. The Chinese online direct sales company will report its fourth quarter financial results before the market opens on Tuesday, and analysts are expecting a net loss of $0.02 per share, below the profit of $0.01 per share the company delivered a year ago. Revenue, on the other hand, is expected to surge by more than 45% year-over-year to $8.15 billion.

#2. Interactive Brokers Group, Inc. (NASDAQ:IBKR)

– Shares Owned by Kylin Management as of December 31: 5.18 Million

– Value of Holding as of December 31: $225.85 Million

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The second place in Kylin’s portfolio is represented by Interactive Brokers Group, Inc. (NASDAQ:IBKR) and the 5.18 million shares  makes it the largest shareholder among institutional investors in our database, trailed by other funds like Quincy Lee’s Ancient Art (Teton Capital), which last declared holding 3.21 million shares. The company started trading ex-dividend on February 26, and will pay a cash dividend $0.10 per share to all shareholders who acquired the stock prior to this date, on March 14. The $0.10 per share dividend implies a 1.16% dividend yield for the stock.

#1. Vipshop Holdings Ltd – ADR (NYSE:VIPS)

– Shares Owned by Kylin Management as of December 31: 18.96 Million

– Value of Holding as of December 31: $289.59 Million

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Finally, there’s Vipshop Holdings Ltd – ADR (NYSE:VIPS), which has been the fund’s top pick for eight consecutive quarters. Over the October-December period, the firm increased its exposure by 7%, taking its holding to almost 19 million shares. Once again, Tiger Global Management also seems bullish on the company, as it last declared holding 49.5 million shares of its stock. Last Wednesday, the company posted earnings of RMB 1.18 per share ($0.18), beating the Street’s consensus estimate, while revenue of RMB 13.9 billion ($2.12 billion), was up by 64.7% year-over-year, also came in RMB 1.6 billion ahead of expectations.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.