Below we present the list of the 5 Best ADR Stocks To Buy Now. For our methodology and a more comprehensive list of top foreign stocks to consider for your portfolio, please see the 11 Best ADR Stocks To Buy Now.
5. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)
Number of Hedge Fund Shareholders: 30
Country of Origin: Hong Kong
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) shares were down 53% year-to-date less than two months ago but have surged by 132% since October 27, wiping out the stock’s 2022 losses and swinging them to a 6% gain. Part of the recent rally was due to the Chinese government renewing the gambling licenses of several casino operators, including the Hong Kong-based Melco Resorts.
That was particularly good news for Melco Resorts & Entertainment Limited (NASDAQ:MLCO), which does the bulk of its business in Macau when the region’s casinos aren’t shuttered, or travel to the autonomous region restricted. Melco suffered its 10th straight quarter of declining results during the three month period ended June 30, as revenue plummeted by 48% to $296 million. Recent results aside, the company was in a solid financial position, with a 22-month liquidity runway as of the end of June. With Macau reopening in earnest, that liquidity should further improve and its 10-quarter run of futility come to an abrupt end.
Hedge fund ownership of Melco Resorts & Entertainment Limited (NASDAQ:MLCO) hit a 5-year low during the fourth quarter of 2021, but has rebounded this year, rising by 43%. Two of the company’s biggest bulls added to their positions during Q3, with Ken Griffin’s Citadel Investment boosting its holding by 15% to 11 million shares and John Khoury’s Long Pond Capital raising its stake by 58% to 10.8 million shares.
4. Sanofi (NYSE:SNY)
Number of Hedge Fund Shareholders: 32
Country of Origin: France
French pharmaceutical giant Sanofi (NYSE:SNY) has been hit with both good and bad news in 2022, and though its shares are down by nearly 9% this year, that’s quite a bit better than the broader market, so investors appear to be giving it the benefit of the doubt.
Two of Sanofi (NYSE:SNY)’s final-phase drug studies were put on hold by the FDA earlier this year, which sent shares tumbling. Later in 2022, the company scrapped a study of its cancer drug SAR444245, taking a $1.58 billion write-down in the process. Sanofi has a lot of other pokers in the fire to compensate for those misses, having more than 80 projects in its pipeline. The company is expected to grow sales at a double digit rate over the next five years thanks to that robust pipeline, which makes them look like a bargain at their current price.
Hedge fund ownership of Sanofi (NYSE:SNY) bottomed out during the first quarter of 2021, with just 15 funds long the stock, down from over 50 eight years earlier. Numerous funds have since taken a stake in the company, as there was a 45% surge in smart money ownership of SNY during Q2 of this year. Ryan Caldwell’s Chiron Investment Management and Kamran Moghtaderi’s Eversept Partners added Sanofi to their 13F portfolios during that quarter.
3. Coupang, Inc. (NYSE:CPNG)
Number of Hedge Fund Shareholders: 36
Country of Origin: South Korea
Shares of Coupang, Inc. (NYSE:CPNG), which operates the leading e-commerce platform in South Korea, have slumped by 37% this year despite the company not only continuing to grow at a rapid rate, but also posting a surprising profit in its latest quarter. The company’s sales rose by 27% to $5.1 billion during Q3, while it swung to a profit of $91 million during the quarter compared to a $324 million loss during Q3 of 2021. Its gross margin rose by 800 basis points year-over-year to 24.2%. The company is still cash flow negative, but with sales and margins growing rapidly, it shouldn’t be long before that changes.
After a steep drop in smart money ownership of Coupang, Inc. (NYSE:CPNG) during Q4, there was a 34% rebound in the first quarter of this year, which held firm during the second quarter, followed by a slight dip in the third quarter. Several funds have aggressive 13F exposure to CPNG, including Lee Ainslie’s Maverick Capital (30.5%), Neil Mehta’s Greenoaks Capital (62.8%), and Stanley Druckenmiller’s Duquesne Capital (18.4%).
Baron Funds was also building more exposure to Coupang, Inc. (NYSE:CPNG) during Q2 and shared its reasoning for doing so in its Q2 2022 investor letter:
“During the quarter, we also added to our position in the leading Korean e-commerce player, Coupang, Inc. (NYSE:CPNG), taking advantage of the stock’s volatility. While the stock sold off, the business remains robust, growing revenues by 32% in the most recent quarter (year-over-year in constant currency) while gaining market share (the industry grew 8%) and reaching profitability in its product commerce segment three quarters ahead of plan.”
2. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Shareholders: 53
Country of Origin: China
Pinduoduo Inc. (NASDAQ:PDD) is another e-commerce company that is worth looking into, this one operating in China. You know something is going very right for the company when its shares are up by 60% this year, in stark contrast to the broader sell off of Chinese stocks.
One needs only look at the company’s latest quarterly results, in which sales grew by 65% to $5 billion and net income skyrocketed by 546% to $1.9 billion, to see why investors are excited. Those numbers are even more impressive given the Chinese economic slowdown, which hasn’t spared other top e-commerce platforms in the country like Alibaba Group Holding Limited (NYSE:BABA), whose sales inched up by just 3% during its latest quarter.
Hedge funds were buying back into Pinduoduo Inc. (NASDAQ:PDD) during the second and third quarters, perhaps in anticipation of PDD shares having bottomed out following a 76% slide between the end of 2020 and April 1, 2022. The number of long positions in Pinduoduo among smart money managers ticked up by 18% during Q2 and by another 23% during Q3, with Lei Zhang’s Hillhouse Capital Management and Rajiv Jain’s GQG Partners among the funds adding PDD to their 13F portfolios since April.
Tao Value wasn’t too concerned about Pinduoduo Inc. (NASDAQ:PDD) shares’ rough end to 2021 according to its Q4 2021 investor letter:
“On the detracting side, one of our largest detractors includes Pinduoduo (ticker: PDD). Pinduoduo (PDD) reported the second consecutive GAAP profit quarter yet missed on the revenue due to nation-wide consumption weakness & scaled back Sales & Marketing efforts. Market disliked it and the stock price plunged on the earnings. In my opinion, the accounting profits proved the original thesis of using S&M to acquire users and using great shopping experience to keep them. After realizing the first growth curve, Pinduoduo now shifted its focus & investment to agriculture. It is still very early, but the reduced size due to price drop warrants a position to watch and continue grow with such a team with strong culture.”
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.
Disclosure: None.
