Below are the 5 best Hong Kong stocks to buy for 2021. We chose these stocks based on Chinese billionaire Zhang Lei’s portfolio as of the end of the fourth quarter of 2020. For a comprehensive list and billionaire Zhang Lei’s investment philosophy please see 10 Best Hong Kong Stocks To Buy For 2021.
5. iQIYI, Inc. (NASDAQ: IQ)
iQIYI, Inc. (NASDAQ: IQ), which provides online entertainment services in the People’s Republic of China, is a member of Hillhouse Capital’s stock portfolio since the beginning of 2018. Shares of IQ increased strongly in the last twelve months after experiencing a selloff in early 2020. The firm held 38.6 million shares of iQIYI at the end of the latest quarter, accounting for 5.37% of the overall portfolio. iQIYI offers internet video, online games, live broadcasting, online literature, animations, e-commerce, and social media platform.
The stock is up about 50% over the last 12 months.
4. Zoom Video Communications, Inc. (NASDAQ: ZM)
The pandemic darling Zoom Video Communications, Inc. (NASDAQ: ZM) generated robust returns for the Chinese billionaire who first invested in the video calling company in 2015. His firm sold almost 40% of the position during the fourth quarter to capitalize on the share price gains. Despite underperformance so far in 2021, Zoom’s stock price is up 209% in the last twelve months.
In a Q4 investor letter, Alger Mid Cap Focus Fund highlighted a few stocks including Zoom Video Communications. Here is what Alger Mid Cap Focus Fund stated:
“Zoom Video Communications offers a cloud-native, video-first communications platform that transforms how people communicate. interact and work together. It offers a better, more efficient experience. easy onboarding and use and capabilities for addressing enterprise needs around scalability. cost and minimal IT involvement. The company seeks to make video collaboration that “just works,” delivering high-quality and frictionless video. voice. chat and content sharing across multiple devices and mediums. Users of Zoom benefit from a platform that is easy to deploy, use and manage that is also scalable and can easily integrate with any workspace, facilitating greater work effectiveness.”
3. JD.com (NASDAQ: JD)
Zhang Lei is the early investor of the Chinese e-commerce platform JD.com (NASDAQ: JD). He first initiated a position in JD in 2014. His firm, however, sold 15% of the stake in Q4 of 2020. Despite that, JD is among the 10 best Hong Kong stocks to buy, according to Chinese billionaire. Hillhouse held 13.5 million shares of JD at the end of the latest quarter.
Argosy Investors, which generated 29.8% in select accounts for 2020, commented on a few stocks including JD.com in an investor letter. Here is what Argosy Investors stated:
“JD.com has been making conscious decisions to break its business up into its component parts, which in our opinion helps surface the value of each business. JD’s enterprise value is about USD $120 billion today. JD spun off its JD Health business worth USD $28 billion (like Teladoc in the US), may spin off its JD Cloud business (similar to AWS in the US), has sold shares in its JD Logistics business and is shooting for a valuation of USD$40 billion in 2021 via an IPO, and JD Digits which provides supply chain and consumer loans was expected to be valued at nearly USD $30 billion before Ant Financial was prevented by the Chinese government from completing its IPO. The combined values of these business segments within JD is about $98 billion, leaving $22 billion for JD’s core retail business (and its cloud business) which is on track for over USD $100 billion in sales this year and growing over 20% per year. Assuming a 5% long-term margin for JD Retail, that segment is generating USD $5 billion of operating profit (EBIT). Given their strong market position, investors could value JD’s retail business alone at 20x EBIT, valuing JD retail at $100 billion. By comparison, Amazon was valued at over $175 billion during the year in which it earned USD $100 billion in revenue, so we continue to believe JD is being undervalued, despite a more competitive environment with Alibaba in China than Amazon faces in the US.”
2. BeiGene, Ltd. (NASDAQ: BGNE)
The biotechnology company BeiGene, Ltd. (NASDAQ: BGNE) is the second-largest stock holding of the Hillhouse stock portfolio, according to the latest 13F filings. Shares of BGNE rallied more than 95% in the last twelve months, extending the five-year gains to 990%. BeiGene is a commercial-stage biotechnology company, engages in discovering, developing, manufacturing, and commercializing medicines for cancer therapeutics in China and the U.S.
1. Pinduoduo Inc. (NASDAQ: PDD)
Pinduoduo (NASDAQ: PDD) is Zhang Lei’s largest stock holding, according to the latest filings. His hedge fund raised its stake in the Chinese e-commerce platform during the fourth quarter of 2020 by 8.72% to 14.45% of the overall portfolio. Shares of Pinduoduo fell 8.5% since the beginning of this year despite a 360% increase in the last twelve months.
Tao Value, which generated a return of 26.43% for the fourth quarter, highlighted a few stocks including Pinduoduo in the Q4 investor letter. Here is what Toa Value stated:
“Pinduoduo (ticker: PDD) reported a very strong Q3 2020, beating key KPIs all-around (GMV, active buyers & Revenue). It even surprisingly recorded the first non-GAAP profit (RMB466 million). Yet, the more important development is Duoduo Maicai, a new fresh grocery initiative. It is a natural extension of Pinduoduo’s deep root in agriculture e-commerce, and I think the logistic expertise it accumulated over years should help them compete. It is also a very nascent market, which attracts other tech giants (including Meituan & Alibaba). I will watch very closely on the developments.”
You can also take a peek at Billionaire Jim Simons’ Top 10 Stock Picks and Billionaire Steve Cohen’s Top 10 Stock Picks.
