Small Fund Scores Big Betting on Chinese Stocks and This Is Why You Should Follow It

New Oriental Education & Tech Grp (ADR) (NYSE:EDU) jumped to the top spot in Kylin Management’s 13F portfolio during the first three months of 2017 as the stock surged by 41%. At the end of March, the fund held 2.90 million shares of the company worth $175.31 million (it sold 21,000 shares during the quarter). Year-to-date, New Oriental Education & Tech Grp (ADR) (NYSE:EDU)’s stock is up by over 80%. Betting on a provider of private educational services in the most populous country on earth seems to be a no-brainer by itself, but New Oriental Education & Tech Grp (ADR) (NYSE:EDU) also has financial results to back up its success. The company reported revenue growth of 26% year-over-year for its fiscal third-quarter, to $437.85 million, while EPS jumped by 39% to $0.43. In addition, New Oriental Education & Tech Grp (ADR) (NYSE:EDU) provided upbeat guidance for its fiscal fourth-quarter, with revenue expected to be in the range of $465.15 million to $479.9 million (annual growth of 18% to 22%). Another investor bullish on New Oriental Education & Tech Grp (ADR) (NYSE:EDU) is fellow Tiger Cub Chase Coleman of Tiger Global Management, which boosted his stake by 54% to 2.43 million shares during the first quarter.

In Alibaba Group Holding Ltd (NYSE:BABA), Kylin Management raised its stake by 31% to 1.21 million shares worth $130.65 million during the first-quarter. The investment initiated during the fourth quarter is paying off, as Alibaba Group Holding Ltd (NYSE:BABA)’s stock has advanced by over 40% since the beginning of the year. Aside from better-than-expected results, Alibaba has been growing at a very fast rate, with its revenue having surged to $15.7 billion in 2016 from just $3 billion in 2012. Out of its fiscal 2016 revenue, $13.08 billion was generated by the China e-commerce segment. It’s interesting to point out that at $13 billion, Alibaba amasses only a tiny portion of China’s e-commerce market, which was estimated at around $900 billion in 2016, so it’s easy to assume that Alibaba still has plenty of room to grow and that it’s likely to do so. Stephen Mandel‘s Lone Pine Capital increased its stake in Alibaba Group Holding Ltd (NYSE:BABA) by 2.28 million shares to 9.90 million shares held at the end of March.

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Another one of Kylin Management’s bets on Chinese e-commerce is on Vipshop Holdings Ltd – ADR (NYSE:VIPS), in which it cut its stake by 59% to 5.18 million shares worth $69.11 million during the first quarter. The reduction is not surprising, since Vipshop Holdings Ltd – ADR (NYSE:VIPS) represents Kylin’s oldest investment, having been in its equity portfolio since the third-quarter of 2013 and the stock has surged by over 130% since then. On the other hand, billionaire Ken Griffin’s Citadel Advisors added 1.09 million shares to its stake in the company during the first-quarter, reporting ownership of 1.48 million shares in its latest 13F.

Vipshop Holdings Ltd – ADR (NYSE:VIPS) has also been recording substantial revenue growth for the last couple of years. In addition, its number of active customers has more than doubled between 2014 to 2016 (to 52.10 million from 24.29 million). For the first-quarter of 2016, Vipshop Holdings Ltd – ADR (NYSE:VIPS) posted revenue of $2.32 billion (up by 32% on the year) and EPS of $0.19, beating estimates by some $60 million and $0.01 respectively. The company also reported having 26 million active customers at the end of the quarter (an increase of 32% on the year) and a 23% jump in total orders to 72.10 million. For the current quarter, Vipshop Holdings expects revenue in the range of $2.47 billion to $2.54 billion, which would represent an increase of between 26% and 30% on the year.

On the final page of this article, we’ll take a look at two of Kylin Management’s new positions.