Best 2016 Ideas Of Chinese Billionaire Investor Zhang Lei

Hillhouse Capital Management is a Beijing, China-based hedge fund founded by Zhang Lei in 2005. Over the past decade, the firm has become one of the largest and best performing in Asia. The fund has a long-term fundamental equity investment philosophy, and focuses on the consumer, TMT, industrials and healthcare sectors. As of January of 2016, the firm had more than $20 billion of assets under management. Hillhouse recently has filed its 13F for the fourth quarter of 2015, disclosing 30 positions, valued at more than $5.7 billion – of which 80% is amassed by consumer discretionary stocks. Based on our analysis, of Hillhouse’s 13F portfolio, its 23 positions in companies with market caps above $1.0 billion posted a weighted average return of over 42% last year. This makes, Hillhouse one of the best-performing funds in our database, trailing healthcare-focused funds like Julian and Felix Bakers’ Baker Bros. Advisors and Joseph Edelman’s Perceptive Advisors, which returned 67.8% and 46.5%, respectively.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the small-cap stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year (see more details here).

JD.Com Inc (ADR) (NASDAQ:JD)

– Shares Owned by Hillhouse as of December 31: 122.6 Million

– Value of Holding as of December 31: $3.95 Billion

Even though Hillhouse trimmed its stake by 10% over the fourth quarter of 2015, JD.Com Inc (ADR) (NASDAQ:JD) continued to represent its largest stake, and was even more valuable than it was three months earlier, as the stock gained 23.81% between October 1 and December 31. Also profiting from this surge was William B. Gray‘s Orbis Investment Management, which last declared holding 23.04 million shares of the company. JD.Com last reported earnings of $0.00 per share, $0.03 below the Street’s consensus, on revenue of $6.94 billion, slightly higher than the expected $6.935 billion.

Mondelez International Inc (NASDAQ:MDLZ)

– Shares Owned by Hillhouse as of December 31: 9.3 Million

– Value of Holding as of December 31: $417 Million

Also maintaining the same spot in Mr. Lei’s list quarter-over-quarter was Mondelez International Inc (NASDAQ:MDLZ), which saw no changes in the firm’s stake in terms of share count, but did see its stock gain 7.09% over the fourth quarter. First Eagle Investment Management also seems quite bullish on the stock, as it increased its position by 40% over the fourth quarter, to 4.9 million shares. However, it should be noted that, a couple of weeks ago, Mondelez posted EPS of $0.46 on revenue $7.364 billion, missing estimates of $0.49 and $7.445 billion.

On the next page, we will take a look at three stocks that witnessed big moves from Hillhouse.

58.com Inc (ADR) (NYSE:WUBA)

– Shares Owned by Hillhouse as of December 31: 1.32 Million

– Value of Holding as of December 31: $87.61 Million

One of Hillhouse’s most bullish moves involves 58.com Inc (ADR) (NYSE:WUBA). Between October and December, the firm boosted its exposure by 90%, disclosing ownership of 1.32 million shares. Similar was the case of Kevin Kenny’s Emerging Sovereign Group, which more than doubled its stake between October and December, taking its holdings to 1.63 million shares, worth almost $108 million as of December 31. Nonetheless, investors should notice that the mid cap Chinese online marketplace last delivered a net loss of $0.50 per share, for the third quarter of 2015, worse than the expected loss of $0.36. On the other hand, revenue of $212.94 million beat the Street’s consensus of $156.5 million, and the previous guidance of $195 million to $200 million. In its upcoming financial results, 58.com is expected to post a loss of $0.61 on revenue of $242.93 million for the last three months of 2015.

Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)

– Shares Owned by Hillhouse as of December 31: 1.12 Million

– Value of Holding as of December 31: $18.93 Million

Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) reported earnings of $0.04 per share and revenue of $945.73 million for the third quarter, missing estimates of $0.10 and $955.45 million. However, Hillhouse seemed quite confident in the company’s future, as it started a new position comprising 1.12 million shares. On the opposite, Leon Cooperman’s famed Omega Advisors closed out its position, which comprised 750,000 shares, over the fourth quarter. For the fourth quarter, analysts expect EPS of $0.05 and revenue of $1.07 billion.

Idea #5 Vipshop Holdings Ltd – ADR (NYSE:VIPS)

– Shares Owned by Hillhouse as of December 31: 869,350

– Value of Holding as of December 31: $13.27 Million

Finally, there’s Hillhouse’s stake in Vipshop Holdings Ltd – ADR (NYSE:VIPS), which witnessed a 50% reduction during the last quarter of 2015. In addition, John Burbank’s Passport Capital, which held 9.26 million shares of the company by September 30, sold all of its stock between October and December. Vipshop delivered EPS of $0.12 per share on revenue of $1.36 billion for the September quarter, in line with the Street’s consensus estimate. Analysts have a consensus EPS of $1.06 on revenue of $12.33 billion for the fourth quarter.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.