In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the Chinese companies ex-Internet that are being accumulated and those being distributed by legendary or guru fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, that are well-known for their savvy picks of winning stocks year after year.
The investing activities of guru fund managers in Chinese Internet companies was examined in a separate article recently, that can be accessed from our author page. Taken together, these guru managers are bullish on Chinese stocks in general, adding a net $528 million in Q4 to their $4.30 billion prior quarter holdings in the group.
The following are the Chinese companies (ex-Internet) that these guru fund managers are most bullish about (see Table):
Trina Solar Ltd. (TSL): TSL is a vertically-integrated Chinese manufacturer of mono-crystalline ingots, wafers and cells to the assembly of high quality solar modules. Guru funds added a net $9 million to their $90 million prior quarter position, and together they hold 22.1% of the outstanding shares. The top guru fund buyer was the Oracle of Australia Kerr Neilson's hedge fund Platinum Investment Management ($7 million), and the top holders were Platinum ($52 million) and Tiger Cub and Star Manager Lee Ainslie's hedge fund Maverick Capital ($43 million).
TSL shares have been weak, down almost 80% in the past year, along with the rest of the solar sector, on account of lower module prices and profits due to an onslaught of negative factors including the weakening demand in its primary European market, over-capacity at most China-based manufacturers, and recent threats on the U.S. Commerce Department imposing tariffs on solar panels imported from China. The company currently generates high losses, while Its shares currently trade near 52-week lows at 0.4 P/B and 0.2 PSR (price-to-sales ratio) compared to averages of 0.5 and 1.4 for its peers in the solar group.
China Mobile Ltd. (CHL): CHL is a Hong Kong-based digital wireless voice and data services company primarily in mainland China, serving over 600 million customers. Guru funds added a net $1 million to their $52 million prior quarter position, and together they hold less than 0.1% of the outstanding shares. The top guru fund buyer was legendary billionaire investor Ken Griffin's Chicago-based hedge fund Citadel ($1 million), and the top holder was Hussman Econometrics Advisors ($40 million).
CHL reported an in-line Q4 last month. Its shares trade near 52-week highs, at a current 10.9 P/E (on a TTM basis) and 2.1 P/B, compared with averages of 15.2 and 1.7 for its peers in the non-U.S. wireless communications group. Also, as a comparison, its closest peer China Unicom Ltd. (CHU) trades at a current 56.3 P/E and 1.2 P/B.
Suntech Power Holdings (STP): STP is a Chinese manufacturer of photo-voltaic cells and modules for worldwide distribution. Guru funds added a net $0.3 million to their $1.7 million prior quarter position, and together they hold 0.4% of the outstanding shares. The top guru fund holder was Ken Griffin's Citadel ($1.9 million). STP shares have also been weak, down almost 75% over the past year, along with the rest of the solar sector. The company currently generates high losses, and its shares trade near 52-week lows at 0.5 P/B and 0.2 PSR compared to averages of 0.5 and 1.4 for its peers in the solar group.
Besides these, guru funds based on their Q4 trading activity indicated that they are bearish on the following Chinese stocks, ex-Internet (see Table):
- Focus Media Holdings Ltd. (FMCN), that operates the largest out-of-the-home digital advertising network in China using audiovisual flat-panel displays, in which guru funds together cut a net $31 million in Q4 from their $65 million prior quarter position in the company;
- Yingli Green Energy (YGE), a Chinese manufacturer engaged in the design, development, marketing, manufacture, installation, and sale of photovoltaic products, including PV cells, PV modules, and integrated PV systems, as well as poly-silicon ingots, blocks, and wafers, in which guru funds together cut a net $29 million in Q4 from their $58 million prior quarter position in the company;
- Fushi Copperweld Inc. (FSIN), a Chinese manufacturer of copper-clad and other bimetallic wire products for telecom, utility and automotive markets, in which guru funds together cut a net $1 million in Q4 from their $14 million prior quarter position in the company;
- JA Solar Holdings (JASO), a Chinese manufacturer of mono-crystalline and multi-crystalline solar cells for solar modules and systems, in which guru funds together cut out completely its $1 million prior quarter position in the company;
- LDK Solar Co. (LDK), a Chinese manufacturer of multi-crystalline solar wafers that are the principal raw material used to produce solar cells, in which guru funds together cut out completely its $1 million prior quarter position in the company; and
- Home Inns & Hotels (HMIN), a manager of a chain of economy hotels in China, with approximately 800 Home Inns in operation and 1,000 Home Inns sealed in franchise agreements, in which guru funds together cut a net $1 million in Q4 from their $2 million prior quarter position in the company.
General Methodology and Background Information: The latest available institutional 13-F filings of over 85+ legendary or guru hedge fund and mutual fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, were analyzed to determine their capital allocation from among different industry groupings, and to determine their favorite picks and pans in each group. The hedge fund and mutual fund managers included in this select group include only high profile names who by virtue of their long-term market-beating returns have earned their standing in the investment community and are worthy of our attention. They include well-known names such as those mentioned above, as well as perhaps relatively lesser-known names that also have a stellar long-term history of beating the markets, such as Seth Klarman, John Griffin, Prem Watsa, Robert Karr and Lee Ainslie. Each guru has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 85-odd guru funds that justify their inclusion in this elite group were detailed in our previous articles that can be accessed from our author page
These legendary or guru fund managers number less than one percent of all funds and yet they control over ten percent of the U.S. equity discretionary fund assets. The argument is that institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When high alpha generating or guru Institutional Investors by virtue of their fund performance, low volatility and elite reputation in the investment community, invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence or even go as far as constructing a model diversified portfolio based on the guru funds best picks.
This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.