We recently published a list of the 10 Best Chinese Stocks to Buy According to Billionaires. In this article, we are going to take a look at where NetEase, Inc. (NASDAQ:NTES) stands against the other Chinese stocks held by billionaires.
The People’s Bank of China’s (PBoC) monetary easing and government stimulus have lifted the valuations of Chinese equities. A few months ago, many investors were expecting the U.S. economy to be in a better position and Chinese stocks were facing significant regulatory worries. However, the tables have turned with the Chinese economy expected to be in a better position compared to 2024.
A Positive Outlook for China
Things have taken a wild turn with the U.S. president imposing high tariffs and investors expecting an economic slowdown in the U.S. On the other hand, China’s advancement in AI and its capabilities to grow its AI infrastructure have intensified since the launch of DeepSeek’s R1 model.
“The U.S. has had a good period, and that’s coming to an end because Trump’s policies are very anti-economy. China has had a very bad period, but it looks as if it’s starting to recover,” Richard Harris, CEO of Port Shelter Investment Management, told CNBC.
Chinese government support for its technology sector has induced much optimism among investors. The Hang Seng Tech Index, which tracks some of the largest Chinese companies listed in Hong Kong, has soared over 21% year-to-date, as of March 25. At the same time, the NASDAQ 100 index, covering the U.S. tech stocks, has plunged over 3.70%. Whereas, the Shanghai Composite Index has risen over 3% compared to a drop of 1.70% in the S&P 500 index.
“Performance of the HSCEI/MSCI China in the past 17 months trended closely to the trajectory a decade ago, making us worry that we might be approaching some correction soon,” analysts at the Bank of America wrote in a report published on March 17.
Harris believes that China’s A shares have been quite depressed for some time compared to the U.S. stocks. With valuation improvements and optimism in the tech sector in China, it is a good time to explore Chinese stocks.
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Our Methodology
To compile our list of the best Chinese stocks to buy according to billionaires, we looked for the Chinese stocks widely held by billionaires. Data for the number of billionaire investors for each stock was taken from Insider Monkey’s database, updated as of Q4 2024. Finally, the 10 best Chinese stocks to buy were ranked in ascending order based on the number of billionaires holding stakes in them. We have also mentioned the number of hedge funds that held these stocks as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
NetEase, Inc. (NASDAQ:NTES)
No. of Billionaire Investors: 11
Total Billionaire Stake: $627.8 Million
No. of Hedge Fund Holders: 38
NetEase, Inc. (NASDAQ:NTES) is a leading internet technology company developing and operating some of China’s most famous mobile and PC-client games. The company operates popular international online games in China through collaborations with global game developers such as Blizzard Entertainment. The company also operates online learning services, smart devices, and marketing tools through its Youdao platform. NetEase Cloud Music offers online music streaming services with membership subscriptions.
NetEase, Inc. (NASDAQ:NTES) had mixed results in 2024, while surpassing the full-year earnings estimates, it missed revenue consensus estimates. The company posted an EPS of $7.14, exceeding estimates of $6.84. The revenue came in at $14.51 billion, missing the estimated $14.58 billion. On the bright side, the Gaming segment performed better compared to 2023. The online games revenue reached RMB 80.4 billion for 2024, up 6% from a year ago. The PC client games also experienced a 17% growth year-over-year.
On March 3, Morgan Stanley analyst Yang Liu CFA maintained a Buy rating on NTES shares, keeping the price target at $117. The analyst highlighted that NetEase’s strategic move to relaunch Condor Heroes 2.0 will revitalize a previously underperforming game. The improvements in the features of the game seem to be attracting more players. Barclays analyst Jiong Shao kept an Equal-weight rating on NTES with a price target increase from $82 to $104 on Feb. 24.
Polen Emerging Markets Growth Strategy stated the following regarding NetEase, Inc. (NASDAQ:NTES) in its first quarter 2024 investor letter:
“NetEase, Inc. (NASDAQ:NTES) is one of the top players in China’s video game industry and saw decent revenue growth in 2023, particularly in its games division, with profit growth close to 20%. The stock also continues to recover after gaming restrictions announced last quarter in China were not nearly as bad as first feared.”
Overall NTES ranks 4th on our list of the Chinese stocks to buy according to billionaires. While we acknowledge the potential of NTES as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NTES but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks To Invest In According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
