In this article we will take a look at the 10 best stocks to buy according to billionaire Zhang Lei, who was an early investor in DiDi Global Inc – ADR (NYSE: DIDI). If you want to skip our detailed analysis of Zhang Lei’s history and hedge fund performance, go directly to the 5 Best Stocks to Buy According to Billionaire Zhang Lei.
Zhang Lei is a Chinese billionaire and founder of the equity firm named Hillhouse Capital Management, Ltd. He has also been the New York Stock Exchange’s (NYSE) chief representative to China and has even laid the foundation for NYSE’s offices in both Beijing and Hong Kong. Hillhouse Capital Management, Ltd. currently manages over $10 billion in 13F securities as of the end of the first quarter.
Zhang Lei’s Early Bet on DiDi Global Inc – ADR (NYSE: DIDI)
Lei is one of the early investors of DiDi Global Inc – ADR (NYSE: DIDI), the Chinese ride-haling company which recently went public in the US with a market cap of $68 billion. Hillhouse started holding talks with DiDi Global Inc – ADR (NYSE: DIDI)’s investors in 2015 to up its stake in the company. The fund’s stake in Didi at the time was under 10%, according to Reuters.
Some other notable investments of Lei based on his Q1 portfolio include Uber Technologies Inc (NYSE: UBER), DoorDash Inc (NYSE: DASH), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Apple Inc (NASDAQ: AAPL) and JD.com, Inc. (NASDAQ: JD).
The billionaire views himself as a product of both the East and the West due to his Chinese roots and American education, and his net worth was calculated as $5.34 billion in 2020.
Philanthropy
Zhang Lei is also a philanthropist. He donated $8.89 million to his American alma mater, the Yale School of Management. Lei later worked for the Yale endowment fund directly under its chief investment officer and founded Hillhouse Capital Management directly afterwards. Lei named his firm after Hillhouse Avenue, one of the streets in Yale campus.
Zhang Lei’s Investment Philosophy
Lei gives the full credit of his accomplishments to the Yale School of Management. During his student years, Lei learnt the theoretical path to successful investments. However, after he graduated and was unable to secure a job in Wall Street, Lei worked in Yale Investments Office instead. The billionaire stated that his investment philosophy was developed during his time at the Yale Investments Office. Moreover, Lei viewed his philosophy as a blend of Swensenism and traditional Chinese Buddhism. In his own words, Zhang Lei believed that successful investments lie in working with good people and building organizations that work in the longer term to create value instead of chasing the shortest path to financial gain.
Lei Zhang of Hillhouse Capital Management
But investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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.
Let’s now review the 10 best stocks to buy according to billionaire Zhang Lei. We used Zhang Lei’s 13F holdings data for the first quarter for this analysis. With each stock, we mentioned the total number of hedge funds having stakes in the stock based on our data of over 800 hedge funds.
Best Stocks to Buy According to DiDi’s Early Investor Billionaire Zhang Lei
10. KE Holdings Inc. (NYSE: BEKE)
Number of Hedge Fund Holders: 33
KE Holdings (NYSE:BEKE) is a platform for both online and offline real estate transactions and services. The company provides real estate sales, spaces for rent, renovation services, and financial services in China. KE Holdings Inc. is 10th in the list of 10 best stocks to buy according to billionaire Zhang Lei.
In May, however, the stock fell after it was reported that China opened an anti-trust investigation against KE Holdings (NYSE:BEKE).
9. I-Mab (NASDAQ: IMAB)
Number of Hedge Fund Holders: 20
I-Mab (NASDAQ: IMAB) is a biopharmaceutical company and is 9th in the list of 10 best stocks to buy according to billionaire Zhang Lei. I-Mab is based in Shanghai, China and was founded in 2014. Although the company is still in the clinical trial stage with most of its drugs, revolutionary breakthroughs of its products are expected. For instance, the company claims that one of its drugs would cure specific autoimmune diseases entirely that were otherwise incurable, while another would treat hormone deficiencies.
Recently, Bloomberg reported that I-Mab (NASDAQ: IMAB) was in discussions with advisors and global pharmaceutical companies for a collaboration agreement for its experimental cancer therapy, Uliledlimab. If the deal goes through, the company’s drug sales could be in “a few billion dollars,” the report said.
8. BridgeBio Pharma, Inc. (NASDAQ: BBIO)
Number of Hedge Fund Holders: 26
BridgeBio Pharma, Inc. (NASDAQ: BBIO) works to develop and manufacture medicines to cure genetic diseases.
In May, the stock gained value it was pitched long at the virtual Sohn Investment Conference by Perceptive Advisors’ Ellen Hukkelhoven.
The company’s earnings per share in the first quarter of 2021 were $1.18, bypassing the consensus estimate of $0.83. Currently, Hillhouse Capital Management holds 5,362,014 shares of BridgeBio Pharma, Inc. (NASDAQ: BBIO) which are valued at $330 million.
Like DoorDash Inc (NYSE: DASH), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Apple Inc (NASDAQ: AAPL), DiDi Global Inc – ADR (NYSE: DIDI) and JD.com, Inc. (NASDAQ: JD), BridgeBio Pharma, Inc. (NASDAQ: BBIO) is one of the best stocks to buy based on billionaire Zhang Lei’s Q1 portfolio and investment history.
Baron Health Care Fund, in its Q1 2021 investor letter, mentioned BridgeBio Pharma, Inc. (NASDAQ: BBIO). Here is what Baron Health Care Fund has to say about BridgeBio Pharma, Inc. in its letter:
“BridgeBio Pharma, Inc. is a biotechnology company focused on developing drugs with an underlying genetic mechanism of action in a decentralized business model. Shares of BridgeBio Pharma, Inc. (NASDAQ: BBIO) declined during a risk off quarter for biotechnology stocks. We retain conviction. Many positive developments occurred in the quarter, including a successful financing; positive data from its first program in ADH1 disease, a rare genetic disease with a range of debilitating symptoms; and the company’s first FDA approval (for Nulibry, which treats a rare inborn error of metabolism).”
7. JD.com, Inc. (NASDAQ: JD)
Number of Hedge Fund Holders: 75
JD.com, Inc. (NASDAQ: JD) is an e-commerce company and a retail infrastructure service provider based in China. The company deals with home appliances, smartphones, printers, furniture, luxury items, apparel, computers and related products, cosmetics, and even automobiles and their parts. Due to the wide range of products it offers, JD.com, Inc. (NASDAQ: JD) is second only to the Alibaba group in China, and is hence the second-largest e-commerce company in the country. JD.com, Inc. (NASDAQ: JD) ranks 7th in the list of 10 best stocks to buy according to billionaire Zhang Lei
Like DoorDash Inc (NYSE: DASH), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Apple Inc (NASDAQ: AAPL), DiDi Global Inc – ADR (NYSE: DIDI) and Uber Technologies Inc (NYSE: UBER), JD.com, Inc. (NASDAQ: JD) is one of the best stocks to buy based on billionaire Zhang Lei’s Q1 portfolio and investment history.
Arisaig Partners, in its Q1 2021 investor letter, mentioned JD.com, Inc. (NASDAQ: JD). Here is what the fund said:
“Our largest holding as a firm, JD.com, we expect to grow earnings at an annualised rate of 30% over the next five years, implying it will trade on an EV / EBITDA of 7.5x at the end of this period. Is this a growth stock or a value stock? Does anyone care? Do these labels really matter?
For the Asia Fund, with a higher pre-existing allocation to our core FMCG holdings coming into the year, we took advantage of capital market volatility to further concentrate on our highest conviction names. JD.com has been the main destination for our limited reallocations as evidence continues to emerge supporting our thesis that the company has a strong right-to-win in the large and highly fragmented USD1.8th Chinese grocery market. We have also been encouraged by the fact that after years of persistence, the company is beginning to engage with us on ESG issues (we have specifically discussed data protection, climate change and the circular economy). ESG is now being considered at the board level, and specific sustainability reporting should follow in the coming months. Having long displayed a healthy obsession with customer service, we interpret these latest conversations as a sign that JD is beginning to develop a more sophisticated understanding of its impact on all stakeholders.”
6. Uber Technologies, Inc. (NYSE: UBER)
Number of Hedge Fund Holders: 130
Uber Technologies Inc (NYSE: UBER) is headquartered in the United States and operates in more than 65 countries around the world.
Evercore ISI recently reiterated its Outperform rating on Uber Technologies Inc (NYSE: UBER), citing positive data from its 4th annual U.S. ride-sharing survey. The firm said its data shows Uber Technologies Inc (NYSE: UBER) is a clear market leader in the ride-sharing industry.
Zhang Lei’s Hillhouse Capital Management, Ltd. owns 6,791,449 shares of Uber Technologies, Inc., which presents a combined value of $370 million. The stake accounts for 3.65% of the total portfolio of Hillhouse Capital, as of the end of the first quarter of 2021.
Like DoorDash Inc (NYSE: DASH), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Apple Inc (NASDAQ: AAPL), DiDi Global Inc – ADR (NYSE: DIDI) and JD.com, Inc. (NASDAQ: JD), Uber Technologies Inc (NYSE: UBER) is one of the best stocks to buy based on billionaire Zhang Lei’s Q1 portfolio and investment history.
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Disclosure: None. 10 Best Stocks to Buy According to Billionaire Zhang Lei is originally published on Insider Monkey.
