In this article, we discuss 5 stocks at risk from the slowing Chinese economy. If you want to read about some more stocks at risk from the slowing Chinese economy, go directly to 10 Stocks At Risk From Slowing Chinese Economy.
5. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 55
Starbucks Corporation (NASDAQ:SBUX) is a specialty coffee firm. Inflation and other macro pressures are already weighing on the stock and reports of a sharp slowdown in the Chinese economy are likely to result in a further slide in the share price. The company controls over 35% of the coffee market in China with thousands of stores across the country. On August 18, Cowen analyst Andrew Charles maintained an Outperform rating on Starbucks Corporation (NASDAQ:SBUX) stock and raised the price target to $104 from $94, noting that a new investor meeting would be a catalyst for the stock in the near-term.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Bridgewater Associates is a leading shareholder in Starbucks Corporation (NASDAQ:SBUX), with 3.2 million shares worth more than $247 million.
In its Q1 2022 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Starbucks Corporation (NASDAQ:SBUX) was one of them. Here is what the fund said:
“We trimmed our positions in most of these companies in 1Q 2022 and sold our stake in Starbucks after a 12+ year holding period. In our view, Starbucks Corporation (NASDAQ:SBUX) continues to be in a unique position to serve its customers who value the quality of its products and the convenient way they can be purchased. At the same time, Starbucks’ business is maturing in western markets, and its employee and store-related costs are growing, which should lead to slower earnings growth than we would prefer and further P/E multiple compression. We believe we have better opportunities as we continue to assess the impact of these issues for Starbucks Corporation (NASDAQ:SBUX).”
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
NIKE, Inc. (NYSE:NKE) makes and sells athletic products. The company has strong exposure to the Chinese market and a slowdown in the Chinese economy will impact the 2025 targets of the firm. Increased competition from local brands, as well as a sharp drawdown in consumer spending across the world will further weigh on the shares of the firm. Inventory issues are also causing the firm to discount prices in the US, a move expected to pressure revenues of the firm in the near-term.
On August 9, Exane BNP Paribas analyst Laurent Vasilescu downgraded NIKE, Inc. (NYSE:NKE) stock to Neutral from Outperform and lowered the price target to $118 from $151, noting that increased uncertainty in China would weigh on the stock in the near-term.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc. (NYSE:NKE) with 6.7 million shares worth more than $687 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“NIKE, Inc. (NYSE:NKE) is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold direct. NIKE, Inc. (NYSE:NKE) is also still under-indexed to the women’s category, which we see as a significant ongoing catalyst.”
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA) markets electric vehicles and clean energy solutions. On August 19, the company announced that it would be opening 48 new Supercharger stations, including 198 Superchargers, in mainland China during the month of July. China is one of the largest EV markets in the world and the firm sold over 28,000 EVs in China in July, a sharp drop from June amid upgrades to the factory in Shanghai. A slowdown in the Chinese economy will impact the sales of EVs in China, hitting Tesla stock.
On August 26, Jefferies analyst Philippe Houchois maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) stock with a price target of $350, accounting for the 3:1 stock split in the target from the previous $1,050.
At the end of the second quarter of 2022, 72 hedge funds in the database of Insider Monkey held stakes worth $7.1 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 80 in the previous quarter worth $11.2 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc. (NASDAQ:TSLA). At its Battery Day last year, Tesla, Inc. (NASDAQ:TSLA) projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA) is a diversified technology company. As a slowing Chinese economy weighs on the shares of the firm, regulatory pressures from both the Chinese and the US governments, the former with regards to algorithm transparency and the latter on audits, have added to the pressures on the share price. These pressures are expected to continue to impact the firm despite the Chinese government injecting $146 billion into the economy and reaching an audit agreement with the US.
On August 8, Deutsche Bank analyst Leo Chiang maintained a Buy rating on Alibaba Group Holding Limited (NYSE:BABA) stock and raised the price target to $160 from $155, appreciating the second quarter earnings beat of the firm.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA), with 14.4 million shares worth more than $1.6 billion.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“We have eliminated 6 holdings during the first quarter (including) Alibaba Group Holding Limited (NYSE:BABA). We have sold our Alibaba Group Holding Limited (NYSE:BABA) position as the company continues to face competitive challenges and regulatory pressures remain, making it difficult (if not impossible) to appropriately assess the range of outcomes and associated probabilities for the future profitability of the business.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) is a diversified technology company. Chinese consumers have shifted to premium phones in recent months, amid a decline in popularity of Huawei, a local smartphone brand, that is being replaced by Apple in China. A slowdown in the Chinese economy will impact this sales momentum for Apple just as it is preparing to release a new iPhone to the market. The firm plans to build 52 million iPhones in the third quarter, up over 8% year-on-year.
On August 19, KeyBanc analyst Brandon Nispel maintained a Buy rating on Apple Inc. (NASDAQ:AAPL) stock and raised the price target to $185 from $177, noting that the firm was off to a strong start in the fourth fiscal quarter.
At the end of the second quarter of 2022, 128 hedge funds in the database of Insider Monkey held stakes worth $143 billion in Apple Inc. (NASDAQ:AAPL), compared to 131 in the preceding quarter worth $182 billion.
In its Q2 2022 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc. (NASDAQ:AAPL) grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple Inc. (NASDAQ:AAPL) is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
You can also take a peek at 10 Stocks Reddit’s WallStreetBets is Buying in July 2021 and Top Robinhood Stocks Popular on Reddit.
