In this article, we reviewed Fang Zheng’s investment philosophy and portfolio management strategies. We also examined the top 10 stock picks of Fang Zheng’s Keywise Capital.
Hong Kong-based Keywise Capital Management‘s founder Fang Zheng strives to generate robust returns through long/short and long-only strategies using a fundamental, bottom-up approach. Zheng has worked as a portfolio manager at JP Morgan Emerging Market Equity Group and as the co-founder of Neo Liberty Management.
The most notable stock holdings in Fang Zheng’s Keywise Capital portfolio include Li Auto Inc. (NASDAQ:LI), ACM Research, Inc. (NASDAQ:ACMR), JinkoSolar Holding Co., Ltd. (NYSE:JKS), Baidu, Inc. (NASDAQ:BIDU) and Vipshop Holdings Limited (NYSE:VIPS).
Our Methodology
For this article, we analyzed Keywise Capital’s 13F stock portfolio as of the second quarter.
Why pay attention to hedge fund holdings? 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 more than 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.
With this context in mind, let’s now discuss the top 10 stock picks of Fang Zheng’s Keywise Capital.
Photo by Nicholas Cappello on Unsplash
Top 10 Stock Picks of Fang Zheng’s Keywise Capital
10. Li Auto Inc. (NASDAQ:LI)
Keywise Capital’s Stake Value: $0.28 million
Percentage of Keywise Capital’s 13F Portfolio: 0.06%
Number of Hedge Fund Holders: 20
China-based Li Auto Inc. (NASDAQ:LI), the manufacturer of smart electric sport utility vehicles (SUVs), has been a member of Fang Zheng’s Keywise Capital over the last several months. Shares of Li Auto Inc. rebounded more than 63% in the last six months after experiencing volatility earlier this year. Li Auto Inc. is one of the top stocks to buy and hold amid its aggressive operational growth potential. Its flagship SUV Li ONE deliveries jacked up by 107% to 7,649 units in October while order intake surpassed 14,500 units in the month.
Of the 873 hedge funds tracked by Insider Monkey, Li Auto Inc. was in 20 portfolios as of June. Elite funds like Ken Griffin’s Citadel Investment Group and Philippe Laffont’s Coatue Management were among the leading shareholders in the company.
9. ACM Research, Inc. (NASDAQ:ACMR)
Keywise Capital’s Stake Value: $0.39 million
Percentage of Keywise Capital’s 13F Portfolio: 0.09%
Number of Hedge Fund Holders: 32
Fang Zheng’s Keywise Capital included ACM Research, Inc. among its top 10 stock picks in the June quarter. The firm’s strategy paid off as shares of ACM Research, Inc. surged 37% in the last six months alone. Despite recent gains, shares of ACM Research, Inc. have more upside potential ahead amid its multi-product strategy. Its flagship cleaning tools, along with an increased contribution from both electrochemical planting (ECP) and advanced packaging products, helped it in posting record revenues in the third quarter.
Hedge funds enthusiasm also increased in ACM Research, Inc. lately. It was in 32 hedge funds’ portfolios as of June. Ryan Thall’s Panview Capital was among the leading stakeholders in the company.
8. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Keywise Capital’s Stake Value: $1.3 million
Percentage of Keywise Capital’s 13F Portfolio: 0.32%
Number of Hedge Fund Holders: 7
Despite selling 96% of stake in JinkoSolar Holding Co., Ltd. during the second quarter, Fang Zheng’s hedge fund held $1.3 million worth of stake in the photovoltaic products seller at the end of June, making it the eighth largest stock holding. Shares of JinkoSolar Holding Co., Ltd. are up more than 250% in the last two years.
Elite funds like Ken Griffin’s Citadel Investment Group and D E Shaw are among the leading stakeholders in the company. JinkoSolar Holding Co., Ltd. was in 7 hedge funds’ portfolios as of June.
7. Baidu, Inc. (NASDAQ:BIDU)
Keywise Capital’s Stake Value: $28.8 million
Percentage of Keywise Capital’s 13F Portfolio: 7.07%
Number of Hedge Fund Holders: 59
Chinese internet search services provider Baidu, Inc. has been experiencing the negative impact of tightening regulations. However, Baidu, Inc. bought $2.5 billion of its outstanding stock since 2020, which is an indication of strong cash generation potential as well as attractive valuations.
Popular hedge funds like Ken Fisher’s Fisher Asset Management and Richard S. Pzena’s Pzena Investment Management are among the leading stakeholders in the company. Of the 873 elite funds tracked by Insider Monkey, 59 were bullish about Baidu, Inc. as of June.
6. Vipshop Holdings Limited (NYSE:VIPS)
Keywise Capital’s Stake Value: $34.6 million
Percentage of Keywise Capital’s 13F Portfolio: 8.49%
Number of Hedge Fund Holders: 36
Fang Zheng’s Keywise Capital saw a dip in Vipshop Holdings Limited stock price as a buying opportunity amid its growth potential. The leading Chinese online discount retailer for brands posted 22% year over year revenue growth in the June quarter while active users and total GMV grew 32% and 25% year over year. Its strong free cash flow generation potential along with a healthy balance sheet is likely to help in sustaining double-digit revenue growth momentum in the quarters ahead.
Aubrey Capital Management is the leading stakeholder in the company with shares worth $66.6 million. The number of long hedge funds’ positions was at 36 as of June, according to data tracked by Insider Monkey.
Like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Sea Limited (NYSE:SE), and Baidu, Inc., Vipshop Holdings Limited (NYSE:VIPS) is one of the top stock picks of Fang Zheng’s Keywise Capital.
5. The Estée Lauder Companies Inc. (NYSE:EL)
Keywise Capital’s Stake Value: $35.7 million
Percentage of Keywise Capital’s 13F Portfolio: 8.75%
Number of Hedge Fund Holders: 50
The Estée Lauder Companies Inc. (NYSE:EL) is one of the best performers among the top 10 stock picks of Fang Zheng’s Keywise Capital. The share price of the consumer staple company surged 31% since the beginning of this year. In addition to share price gains, the company also offers a dividend yield of around 0.70%. The Estée Lauder recently raised its dividend by 13% to $0.60 per share.
The Estee Lauder Companies was in 50 hedge funds’ portfolios as of June. Ako Capital was the leading stakeholder in the company with shares worth $336 million. Kevin Parker’s Sustainable Insight Capital Management, the second leading stakeholder in the company, lifted its position by 520% to $7.1 million worth of shares.
4. Adobe Inc. (NASDAQ:ADBE)
Keywise Capital’s Stake Value: $52.5 million
Percentage of Keywise Capital’s 13F Portfolio: 12.87%
Number of Hedge Fund Holders: 89
Adobe Inc. (NASDAQ:ADBE) stock price outperformed the broader market index year to date amid strong demand for its software products. The company posted $3.94 billion in revenue in the September quarter and expects its revenues to hit $4.07 billion in the final quarter of 2021. For Adobe’s stock, Oppenheimer analyst Brian Schwartz set an outperform rating and $68 price target.
3. Sea Limited (NYSE:SE)
Keywise Capital’s Stake Value: $62.9 million
Percentage of Keywise Capital’s 13F Portfolio: 15.41%
Number of Hedge Fund Holders: 104
Sea Limited achieved stellar financial and operational performance in the past year and recently raised $6 billion to invest in growth opportunities. The shares of the popular game developer are up 93% in the past year, showing investors’ confidence.
2. Beyond Meat, Inc. (NASDAQ:BYND)
Keywise Capital’s Stake Value: $68.9 million
Percentage of Keywise Capital’s 13F Portfolio: 16.9%
Number of Hedge Fund Holders: 17
After a 20% selloff since the beginning of the year, Beyond Meat, Inc. (NASDAQ:BYND), the second-largest stock holding of Fang Zheng’s Keywise Capital, provides investors with an attractive buying opportunity. The company’s share price is under pressure due to short-term macro and micro-economic factors, a decrease in retail orders, the effects of the COVID-19 Delta variant, and delays in distribution expansion.
Fang Zheng’s Keywise Capital held 438100 shares of Beyond Meat, Inc. as of June. Overall, it was in 17 hedge funds’ portfolios at the end of June.
1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Keywise Capital’s Stake Value: $119.8 million
Percentage of Keywise Capital’s 13F Portfolio: 29.36%
Number of Hedge Fund Holders: 64
Taiwan Semiconductor Manufacturing Company Limited is one of the top stocks to buy. In addition to the stock price gains, the company also offers a dividend yield of over 1.50%. The company raised its dividends in the last seven consecutive years. Moreover, its returns are backed by strong financial numbers. It generated $14.88 billion in third-quarter revenue, up 11.4% quarter over quarter.
In the third quarter investor letter, Wedgewood Partners, an investment management firm, mentioned a few stocks including Taiwan Semiconductor. Here is what Wedgewood Partners stated:
“Taiwan Semiconductor Manufacturing detracted from performance as the market attempted to price in a downturn in the semiconductor cycle. Although there are some signs that memory markets might be somewhat oversupplied, we have yet to see any tangible signs that logic semiconductors – particularly at the leading-nodes where the Company dominates – are in anything but short supply. In addition, and as a result of this strong demand, the Company should be able to pass through price increases to help fund very attractive returns on the rare leading-edge capacity that serves this demand.”
You can also take a look at Best Stocks Under $11 in Cathie Wood’s Portfolio and Top 10 Stock Picks of Boykin Curry’s Eagle Capital Management.
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This article is originally published at Insider Monkey.
