In this article, we discuss the 10 American stocks that can be affected by China’s real estate market crash. If you want to read about some more American stocks that can be affected by China’s real estate market crash, go directly to China’s Real Estate Market Crash Can Affect These 5 American Stocks.
The real estate sector in China has been tethering on the brink of collapse over the past few months after real estate giant Evergrande, in August 2021, warned of liquidity and default risks if it failed to resume construction, dispose of assets, and renew loans. The liquidity crisis of Evergrande threatens to snowball into a much bigger problem for the Chinese economy since the company has investments in health, electric vehicles, cultural tourism, and technology businesses, some even outside China.
The real estate sector in China overall is facing the music of years of governmental neglect as well. S&P Global Ratings has already warned that nearly 20% of Chinese developers it rates are at risk of insolvency. Research firm China Index Academy claims that new housing sales shrank 27% on the year in volume in the first half of 2022 in 100 major cities in China. The crisis is spreading to banks as well. This is significant since 26% of total outstanding loans at Chinese banks are linked to the real estate sector.
A slowdown in the Chinese economy, the second-largest in the world, will have ripple effects across the world. In the US, the collapse of the Lehman Brothers led to a global financial meltdown. American stocks with strong exposure to the Chinese market, like Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and The Walt Disney Company (NYSE:DIS), are already feeling the heat of this developing situation, and the US trade war with China and COVID shutdowns are adding to the pressures.
Our Methodology
The companies that are based in the United States but have deep links with the Chinese economy were selected for the list. The business fundamentals of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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China’s Real Estate Market Crash Can Affect These American Stocks
10. Wynn Resorts, Limited (NASDAQ:WYNN)
Number of Hedge Fund Holders: 32
Wynn Resorts, Limited (NASDAQ:WYNN) is a Las Vegas-based corporation that owns and operates luxury hotels and casinos. The firm has strong exposure to the Chinese market and any slowdown in the Chinese economy will have disastrous consequences for the stock. This is illustrated by the recent earnings of the firm in which it missed market estimates on revenue by $72 million due to Macau uncertainty. Wynn Resorts, Limited (NASDAQ:WYNN) has extensive operations in Macau and generates over 70% of its revenue from the area.
On August 10, Deutsche Bank analyst Carlo Santarelli maintained a Buy rating on Wynn Resorts, Limited (NASDAQ:WYNN) stock and lowered the price target to $85 from $92, noting that the firm was reporting better-than-forecast metrics from operations in Vegas.
At the end of the first quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $269 million in Wynn Resorts, Limited (NASDAQ:WYNN), up from 29 the preceding quarter worth $260 million.
Just like Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and The Walt Disney Company (NYSE:DIS), Wynn Resorts, Limited (NASDAQ:WYNN) is one of the stocks that can be affected by the real estate market crash in China.
In its Q3 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Wynn Resorts, Limited (NASDAQ:WYNN) was one of them. Here is what the fund said:
“In the most recent quarter, we exited the Fund’s holdings in Wynn Resorts, Limited (NASDAQ:WYNN) due to: (i) ongoing COVID-19-related travel restrictions in China, Macau, and Singapore; and (ii) the Macau government’s announcement to tighten its casino regulatory oversight.”
9. Qorvo, Inc. (NASDAQ:QRVO)
Number of Hedge Fund Holders: 33
Qorvo, Inc. (NASDAQ:QRVO) makes and sells semiconductor products. The semiconductor firm has extensive links with Chinese companies working in the tech sector. A real estate crash in China is more than likely to affect manufacturing capabilities at these tech firms, which will hit Qorvo hard as it generates over half of its total revenue from shipments to the Chinese. The firm supplies chips to smartphones makers like Oppo and Vivo in China that have recently cut their sales estimates due to lower demand and currency devaluation.
On August 4, Craig-Hallum analyst Anthony Stoss maintained a Buy rating on Qorvo, Inc. (NASDAQ:QRVO) stock and lowered the price target to $140 from $180, noting that smartphone weakness was a potential headwind for the firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in Qorvo, Inc. (NASDAQ:QRVO) with 664,704 shares worth more than $82 million.
In its Q1 2022 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Qorvo, Inc. (NASDAQ:QRVO) was one of them. Here is what the fund said:
“Qorvo, Inc. (NASDAQ:QRVO) is one of the two major providers of radio frequency RF systems which are critical components of mobile devices including smart phones and the Internet of Things (IoT). Two transitory concerns have recently affected the company’s stock price. First, supply chain issues continue to be a constraint. Second, Apple recently announced its decision to decrease production of its iPhone SE model. Neither of these issues threatens their long-term competitive position. Qorvo’s value is stable and despite the recent pressure on the stock price, we feel its long-term prospects are promising.”
8. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 52
The Boeing Company (NYSE:BA) markets military aircraft, satellites, and missile defense systems. In the past five decades, the company has developed a lasting relationship with aviation authorities in China, regularly selling the country airplanes and aviation equipment. The trade war between the US and China in the past few years has hit this business of the firm, and any slowdown in the Chinese economy will further the pain. The Chinese market accounts for nearly a fourth of all airplane sales in the globe.
On August 1, Morgan Stanley analyst Kristine Liwag maintained an Overweight rating on The Boeing Company (NYSE:BA) stock with a price target of $215, noting that clearance for deliveries of the 787 Dreamliner aircraft was a positive catalyst for the firm.
At the end of the first quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in The Boeing Company (NYSE:BA), compared to 50 in the preceding quarter worth $1.1 billion.
7. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 54
Caterpillar Inc. (NYSE:CAT) markets construction and mining equipment. The company has been doing business in China since 1975. It generates around 25% of profits from the Asia-Pacific region, and although that includes sales in other countries, a major portion of this revenue comes from China. The firm has around 27 plants operating in the country and since these are all directly related to construction equipment, a real estate crash in the country would directly affect the revenue of the firm.
On August 3, UBS analyst Steven Fisher maintained a Buy rating on Caterpillar Inc. (NYSE:CAT) stock and lowered the price target to $225 from $250, backing the firm to achieve margin expansion targets in the coming months.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Caterpillar Inc. (NYSE:CAT), with 7.2 million shares worth more than $1.6 billion.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Caterpillar Inc. (NYSE:CAT) was one of them. Here is what the fund said:
“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”
6. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 58
Starbucks Corporation (NASDAQ:SBUX) is a specialty coffee firm. China is the second-largest market for the company, following the US. Although the revenue exposure of the firm to the market is limited to less than 25%, any crash in the Chinese economy would directly weigh on the shares of the firm since it operates 16% of all its stores in China. In the third fiscal quarter, the firm generated nearly $545 million in revenue in a reopened Chinese economy. The firm controls nearly 35% of the coffee market in the Asian country.
On August 3, JPMorgan analyst John Ivankoe maintained an Overweight rating on Starbucks Corporation (NASDAQ:SBUX) stock with a price target of $92, noting that an upcoming analyst day was an important event for the firm.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Starbucks Corporation (NASDAQ:SBUX), with 8.2 million shares worth more than $749 million.
In addition to Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA), and The Walt Disney Company (NYSE:DIS), Starbucks Corporation (NASDAQ:SBUX) is one of the stocks with strong exposure to the Chinese market.
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).”
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Disclosure. None. China’s Real Estate Market Crash Can Affect These 10 American Stocks is originally published on Insider Monkey.
