5 Best ADR Stocks To Buy Now

1. Sea Limited (NYSE:SE)

Number of Hedge Fund Shareholders: 56

Country of Origin: Singapore

Topping the list of best ADR stocks to buy now is Singapore-based gaming and e-commerce company Sea Limited (NYSE:SE). SE shares have experienced both a meteoric rise and a precipitous fall over the past three years, gaining more than 1,000% between November 2019 and November 2021, before crumbling by 83% since.

What has investors most worried about the stock now is the slowdown of its gaming division, which greatly impacts its broader international expansion plans. Sea Limited’s MO has been to build a base of customers through its gaming platform and then pull them into the company’s e-commerce and financial services platforms from there. The gaming division’s sales fell by 18% in Q3, while active users fell 8% quarter-over-quarter.

Sea’s overall revenue grew by 17% during the quarter though, thanks to strong performances from its e-commerce and financial services divisions. The latter grew revenue by nearly 140% year-over-year. As it rapidly outpaces and eventually surpasses the gaming division in sales, its impact on the company’s top line will be magnified even further. Sea Limited has been scaling back its expansion plans and cutting staff, which crimps its long-term growth potential, but there’s still plenty to like about the company.

Hedge fund ownership of Sea Limited (NYSE:SE) has fallen precipitously over the past four quarters, declining by 55%. Formerly one of the 30 most popular stocks among hedge funds, Sea Limited has now fallen outside the top 150. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital and Crispin Odey’s Odey Asset Management Group are two of the funds that have sold off their SE positions over the past few quarters.

The Baron New Asia Fund also sold off Sea Limited (NYSE:SE) this year, noting in its Q1 2022 investor letter that it had lost confidence in the future success of the company’s aggressive international expansion:

“Sea Limited, a global digital gaming and e-commerce company, detracted from performance for the period held. Similar to other online consumer businesses, Sea faced significant multiple compression in the quarter, exacerbated by a slowdown in user growth at its key Free Fire digital game and mounting investments in its e-commerce operation, particularly in new markets like Brazil. We exited our position as we lost confidence in the long- term unit economics in some of Sea’s new markets and were concerned by the simultaneous slowdown in revenue growth and increase in underlying cash burn.”

For more of the latest stock picks worth considering for your portfolio, check out 11 Best Future Food Stocks To Buy and Best Time To Buy Dividend Stocks.

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