In this article, we discuss 5 China stocks in Ray Dalio’s portfolio. If you want to read our analysis of Dalio’s stance on China and more of his stock picks, go directly to 10 China Stocks in Ray Dalio’s Portfolio.
5. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders: 25
Yum China Holdings, Inc. (NYSE:YUMC) is a Shanghai-based company that operates and franchises restaurants in China under the KFC, Pizza Hut, Little Sheep, Huang Ji Huang, Lavazza, COFFii & JOY, Taco Bell, and East Dawning brands. Bridgewater Associates owns more than 1.5 million shares of Yum China Holdings, Inc. (NYSE:YUMC) worth $75 million as of Q2 2022, representing 0.31% of the total 13F holdings. Despite missing market estimates for EPS and revenue during Q2 2022, the company reaffirmed its FY 2022 outlook of opening approximately 1,000 to 1,200 new stores.
On July 26, CMB International analyst Walter Woo upgraded Yum China Holdings, Inc. (NYSE:YUMC) to Buy from Hold with a HK$426.17 price target, up from HK$287.57. While the analyst expects future earnings cuts to occur, easing pandemic restrictions and efficient cost management make him optimistic on Yum China Holdings, Inc. (NYSE:YUMC)’s outlook for the second half of 2022.
Among the hedge funds tracked by Insider Monkey, Yum China Holdings, Inc. (NYSE:YUMC) was part of 25 hedge fund portfolios at the end of Q2 2022, compared to 27 funds in the earlier quarter. GuardCap Asset Management is the largest shareholder of the company, with more than 9 million shares worth $438 million.
4. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 28
Li Auto Inc. (NASDAQ:LI) was founded in 2015 and is headquartered in Beijing, China. The company develops and manufactures new energy vehicles in the People’s Republic of China. Ray Dalio’s Bridgewater Associates owned 3.26 million shares of Li Auto Inc. (NASDAQ:LI) in the second quarter of 2022, worth more than $125 million, representing 0.53% of the total holdings. Li Auto Inc. (NASDAQ:LI) is looking to build an industrial park for auto parts in the Jiangsu province of China.
On August 29, Morgan Stanley analyst Tim Hsiao maintained an Overweight rating and a $53 price target on Li Auto Inc. (NASDAQ:LI) shares. The analyst said that Li Auto Inc. (NASDAQ:LI)’s August delivery of L9 SUVs will be delayed due to power shortages in Sichuan and a “production hiccup” in its range extension system.
According to Insider Monkey’s data, 28 hedge funds were bullish on Li Auto Inc. (NASDAQ:LI) at the end of June 2022, with collective stakes worth $1.40 billion. Chase Coleman’s Tiger Global Management is the biggest stakeholder of the company, with 12.8 million shares worth $490 million.
3. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 37
KE Holdings Inc. (NYSE:BEKE) is a Beijing-based company that runs an integrated online and offline platform for real estate transactions and services in the People’s Republic of China. The company operates through three segments – Existing Home Transaction Services, New Home Transaction Services, and Emerging and Other Services. Ray Dalio’s portfolio had over 3 million shares of KE Holdings Inc. (NYSE:BEKE) in Q2 2022, worth $55.4 million.
On August 25, Barclays analyst Jiong Shao raised the price target on KE Holdings Inc. (NYSE:BEKE) to $26 from $24 and reaffirmed an Overweight rating on the shares. The company’s “much stronger than expected” Q2 results showed a 30% revenue beat and demonstrate that Chinese consumers are “coming out in droves to scoop up homes,” the analyst told investors.
According to Insider Monkey’s data, 37 hedge funds were bullish on KE Holdings Inc. (NYSE:BEKE) at the end of June 2022, up from 34 funds in the last quarter. Thomas Steyer’s Farallon Capital is a notable position holder in the company, with approximately 10 million shares worth $178.75 million.
Here is what Tao Value has to say about KE Holdings Inc. (NYSE:BEKE) in its Q3 2021 investor letter:
“As witnessed in the past quarter, the government intervention in the Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE holdings (ticker: BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
2. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 41
Pinduoduo Inc. (NASDAQ:PDD) operates an e-commerce platform in the People’s Republic of China. The company posted upbeat second quarter results, earning 93 cents a share on a revenue of $4.7 billion. Pinduoduo Inc. (NASDAQ:PDD)’s solid performance is an ode to the resilience of Chinese customers, and the company expects strong sales during China’s 618 shopping festival. Ray Dalio owns 4.8 million Pinduoduo Inc. (NASDAQ:PDD) shares as of Q2 2022 worth $297.5 million, representing 1.26% of his total 13F portfolio.
On August 21, Macquarie analyst Ellie Jiang raised the price target on Pinduoduo Inc. (NASDAQ:PDD) to $104 from $77 and maintained an Outperform rating on the shares after the company reported “strong” Q2 results. She lifted her 2022/23 non-GAAP net profit estimates by 52% and 36%, respectively, to reflect a more optimistic outlook for ads monetization.
According to Insider Monkey’s Q2 data, 41 hedge funds were bullish on Pinduoduo Inc. (NASDAQ:PDD), up from 36 funds in the last quarter. Rajiv Jain’s GQG Partners is the leading position holder in the company, with 6.15 million shares worth about $381 million.
Here is what Tao Value has to say about Pinduoduo Inc. (NASDAQ:PDD) in 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 to grow with such a team with a strong culture.”
1. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 45
Baidu, Inc. (NASDAQ:BIDU) is a Beijing-based company that provides internet search services in China. The company posted a Q2 Non-GAAP EPADS of $2.36 and a revenue of $4.43 billion on August 30, outperforming Wall Street estimates by $0.79 and $230 million, respectively. The company had a free cash flow of $823 million. Ray Dalio boosted his Baidu, Inc. (NASDAQ:BIDU) stake by 2% in Q2 2022, holding 1.14 million shares worth over $170 million.
On August 31, JPMorgan analyst Alex Yao upgraded Baidu, Inc. (NASDAQ:BIDU) to Overweight from Neutral with a price target of $200, up from $160, after lifting his FY22 and FY23 EPS estimates by 20% and 22%, respectively, as he expects a margin recovery. He forecasts Baidu, Inc. (NASDAQ:BIDU)’s EPS growth to continue being “notable” after Q4 and projects upward revisions of other earnings estimates to support a higher stock price.
Among the hedge funds tracked by Insider Monkey, 45 funds were bullish on Baidu, Inc. (NASDAQ:BIDU) at the end of June 2022, compared to 47 funds in the last quarter. John W. Rogers’ Ariel Investments is the largest stakeholder of the company, with 2.64 million shares worth about $393 million.
Here is what Horos Asset Management has to say about Baidu, Inc. (NASDAQ:BIDU) in its Q1 2022 investor letter:
“Although the initial reaction of the Chinese government was passive, it seems that the blacklist published by the SEC, which already includes companies as important as the technology giant Baidu, has shaken things up. Thus, at the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information.
While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. In this regard, some companies are already listed on the Hong Kong stock exchange, as is the case of the three major technology companies (Alibaba Group, Tencent Holdings and Baidu).”
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