Tiger Pacific’s New Investments in Chinese Stocks, Plus 1 It Sold Off

Tiger Pacific Capital is a New York-based hedge fund founded by Run Ye, Junji Takegami and Hoyon Hwang in 2012, with seed money from legendary investor Julian Robertson. According to its recently-released 13F filing for the third quarter, Tiger Pacific’s U.S. equity portfolio was worth $576 million, and consisted of just eight long positions.

Tiger Pacific, which focuses primarily on companies based in China, made a number of noteworthy moves in Chinese equities during the quarter. We’ll take a look at those moves in this article and see what Chinese stocks the fund is bullish on, as well as one that simply is not any longer.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

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Baidu Inc (ADR) (NASDAQ:BIDU)

Tiger Pacific sold all 75,404 Baidu Inc (ADR) (NASDAQ:BIDU) shares that it had owned on June 30 during the third quarter. The stock has lost 7.62% so far this year and the company reported its biggest earnings drop ever in the second quarter, amid government-imposed ad restrictions that have severely dented its search business. Baidu posted net income of 2.4 billion yuan ($360.5 million) for the quarter, down by 36% from a year earlier. While its income rebounded in the third quarter, its revenue fell by 0.7% year-over-year, and the company has warned that revenue could slide by as much as 4.6% year-over-year during the fourth quarter. Ken Fisher’s Fisher Asset Management reported ownership of about 1.22 million shares of Baidu Inc (ADR) (NASDAQ:BIDU) at the end of third quarter.

China Lodging Group, Ltd (ADR) (NASDAQ:HTHT)

– Shares Owned by Tiger Pacific Capital (as of September 30): 42,314

– Value of Tiger Pacific Capital’s Holding (as of September 30): $1.91 million

Tiger Pacific bought 42,314 shares of China Lodging Group, Ltd (ADR) (NASDAQ:HTHT) in the third quarter, with the aggregate value of the new stake being $1.91 million on September 30. The Shanghai-based hotel company earned $0.72 in the second quarter, well above analysts’ forecasts of $0.41, while revenue came in at $254.4 million, beating the estimates of $248.76 million. The company expects third quarter net revenue to grow by between 10% and 12.5% year-over-year. The stock is up by over 44% so far this year. Fisher Asset Management has 65,937 shares of China Lodging Group, Ltd (ADR) (NASDAQ:HTHT) in its portfolio as of the end of the third quarter.

On the next page we’ll discuss three more of Tiger Pacific’s third quarter moves.

Weibo Corp (ADR) (NASDAQ:WB)

– Shares Owned by Tiger Pacific Capital (as of September 30): 93,280

– Value of Tiger Pacific Capital’s Holding (as of September 30): $4.67 million

Beijing-based microblogging service Weibo Corp (ADR) (NASDAQ:WB) was another new addition to Tiger Pacific’s portfolio during the third quarter. Shares made a huge move during the quarter, gaining almost 75%, so it’s unclear what average cost Tiger Pacific paid for its position and just how bullish the fund is at its current valuation, which includes a P/E of over 225. The social network company, which is often dubbed the Chinese version of Twitter Inc (NYSE:TWTR), has about 282 million monthly users. Unlike Twitter, Weibo is still growing rapidly, reporting 36% growth in daily active users for the second quarter, while monthly active users were up by 33%. Weibo’s growth prospects are huge, as the company currently has no competitor in China to threaten its userbase. As of the end of the third quarter, Louis Navellier’s Navellier & Associates owns 94,984 shares of Weibo Corp (ADR) (NASDAQ:WB).

YY Inc (ADR) (NASDAQ:YY)

– Shares Owned by Tiger Pacific Capital (as of September 30): 135,800

– Value of Tiger Pacific Capital’s Holding (as of September 30): $7.24 million

Tiger Pacific added real-time video and audio-based social networking company to its portfolio in the third quarter, buying 135,800 shares of the company. On Wednesday, HSBC initiated coverage of YY Inc (ADR) (NASDAQ:YY) with a ‘Buy’ rating and $61 price target, which suggests upside potential of 18%. YY reported second quarter EPS of RMB5.97 ($0.88), versus RMB5.10 reported for the same period of last year. For the full year, the company expects revenue of RMB2.00 million-to-2.10 million. The stock is down by 13.54% year-to-date. Out of the funds tracked by Insider Monkey, 18 owned $61.6 million worth of YY Inc (ADR) (NASDAQ:YY) as of the end of the second quarter.

Noah Holdings Limited (ADR) (NYSE:NOAH)

– Shares Owned by Tiger Pacific Capital (as of September 30): 1.45 million

– Value of Tiger Pacific Capital’s Holding (as of September 30): $37.87 million

Tiger Pacific reported ownership of over 1.45 million shares of the Shanghai-based wealth management services company as of September 30, down by 4% compared to a quarter earlier. Earlier this month, Noah ranked 12th on Fortune’s list of the “100 Fastest-Growing Companies“. The company said that it managed to secure the prestigious position due to its three-year performance in profit, revenue, and stock growth. On Monday, Noah said that it has entered into an investment agreement with private equity firm Sequoia Capital China, according to which Sequoia will invest RMB348 million ($51.7 million) in Noah’s asset management business by acquiring equity interests. Noah’s shares have lost 10.49% so far this year. In the second quarter, Noah reported net revenue of RMB651.7 million (US$98.1 million). Just six hedge funds tracked by Insider Monkey were long Noah Holdings Limited (ADR) (NYSE:NOAH) at the end of the second quarter.

Disclosure: None