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10 Best Stocks to Invest In According to Chinese Billionaire Lei Zhang

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·14 min read
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In this article, we will discuss 10 best stocks to invest in according to Chinese billionaire Lei Zhang based on Q1 holdings of the fund. If you want to skip our detailed analysis of Zhang's history, investment philosophy, and hedge fund performance, go directly to 5 Best Stocks to Invest In According to Chinese Billionaire Lei Zhang.

Lei Zhang, CFA, is a Chinese businessman, investor, and philanthropist having a total worth of about $3 billion, according to Forbes. He is the founder, Chief Investment Officer and Chairman of Hillhouse Capital Management. He has also served as the New York Stock Exchange's (NYSE) top representative in China, laying the groundwork for NYSE offices in Beijing and Hong Kong.

Zhang, the 48-year-old Hillhouse founder, was born in China's Henan province. He proceeded to America's famed Yale University after studying finance at Renmin University in Beijing, where he met Yale's chief investment officer David Swensen. In his early investing career, Zhang learned about investing from Swensen. Zhang returned to China in 2005 and established Hillhouse Capital with a $20 million seed investment from Yale University's endowment. As of the second quarter of 2021, Hillhouse manages over $9.7 billion in 13F securities.

As of the second quarter of 2021, Lei Zhang’s Hillhouse Investment Management has stakes in several big companies like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV).

Based on the latest 13F holdings for the second quarter of 2021, Hillhouse Capital Management owns 360,495 shares in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), worth $43.32 million. On August 10, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) declared its net revenue for July 2021. The revenue for July 2021 was approximately NT$124.56 billion, down 16.1% from June 2021, but up 17.5% from July 2020. On July 28, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) gained approval from the Taiwan government to continue operating a sophisticated semiconductor manufacturing plant. On June 30, Susquehanna analyst Mehdi Hosseini upgraded Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) to “Neutral” from “Negative” and increased his price target to $105 from $85.

Hillhouse Capital Management owns 713,400 shares in Alibaba Group Holding Limited (NYSE: BABA) after increasing its holding by 426% from the first quarter of 2021. On August 17, Alibaba Group Holding Limited (NYSE: BABA) launched a new NFT sponsored by the Sichuan province government. It will help trademark holders sell tokenized licenses to intellectual property. On August 5, Susquehanna analyst Shyam Patil lowered the price target on Alibaba Group Holding Limited (NYSE: BABA) to $310 from $350 and maintained a "Positive" rating on the shares. According to the analyst, despite a minor miss on consolidated sales, CMR growth of 57% YoY was solid, and the firm is experiencing improved profitability leverage following long investment periods.

Lei Zhang's Hillhouse Capital Management also has a stake in XPeng Inc. (NYSE: XPEV). The hedge fund owns 896,500 shares of the company, worth $39.82 million. On August 18, The Zhaoqing Municipal Government and the Zhaoqing High Technology Industry Development Zone signed an agreement with XPeng Inc. (NYSE: XPEV) to establish the Phase Two expansion project of the XPeng Zhaoqing Smart EV Manufacturing Base in Guangdong Province. On July 2, Citi analyst Jeff Chung raised the firm's price target on XPeng Inc. (NYSE: XPEV) to $56.30 from $50.30 and maintained a “Buy” rating on the shares.

Lei Zhang Hillhouse Capital
Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

While Zhang Lei’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context in mind, here is our list of stocks to invest in according to Chinese billionaire Lei Zhang. We used Zhang’s 13F portfolio for the second quarter for this analysis.

Best Stocks to Invest In According to Chinese Billionaire Lei Zhang.

10. salesforce.com, inc. (NYSE: CRM)

Zhang's Stake Value: $277,607,000 Percentage of Lei Zhang's 13F Portfolio: 2.85% Number of Hedge Fund Holders: 108

salesforce.com, inc. (NYSE: CRM) provides enterprise cloud computing solutions that focus on customer relationship management. It was founded in 1999 and is placed tenth on the list of 10 best stocks to invest in according to Chinese billionaire Lei Zhang. salesforce.com, inc. (NYSE: CRM) has offered investors more than 20.79% in returns over the course of the past 12 months.

On August 18, JMP Securities analyst Patrick Walravens raised the price target on salesforce.com, inc. (NYSE: CRM) to $320 from $282 and kept an "Outperform" rating on the shares.

Hillhouse Capital Management holds 1.14 million shares in salesforce.com, inc. (NYSE: CRM), worth over $277 million. This represents 2.85% of their portfolio. In the second quarter of 2021, 108 hedge funds in the database of Insider Monkey held stakes worth $11.77 billion in salesforce.com, inc. (NYSE: CRM), up from 91 the preceding quarter worth $8.84 billion.

Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV), salesforce.com, inc. (NYSE: CRM) is one of the best stocks according to Chinese billionaire Lei Zhang.

In its first-quarter 2021 investor letter ClearBridge Investments, mentioned salesforce.com, inc. (NYSE: CRM). Here is what the fund said:

“We added to our software-as-a-service (SaaS) exposure with the initiation of SaaS leader salesforce.com, which develops software for customer relationship management (we added Workday, which enterprise resource planning applications, last quarter). Saleforce.com is well-positioned in the most attractive end markets in software and will benefit from secular drivers such as remote work and the digital transformation. Salesforce.com is a sustainability leader as well, with a commitment to carbon-neutral cloud, toward which it has set a goal of 100% renewable energy for global operations by fiscal year 2022. The company has a strong focus on equality, in terms of equal rights, pay, education and opportunity. As a data company it has been leading on workforce disclosures and seeks to have 50% of its U.S. workforce made up of underrepresented groups by 2024.”

9. JD.com, Inc. (NASDAQ: JD)

Zhang's Stake Value: $293,965,000 Percentage of Lei Zhang's 13F Portfolio: 3.02% Number of Hedge Fund Holders: 76

JD.com, Inc. (NASDAQ: JD) provides enterprise cloud computing solutions focused on customer relationship management. The company was founded in 2006 and stands ninth on the list of 10 best stocks to invest in according to Chinese billionaire Lei Zhang.

On July 13, Arete analyst Richard Kramer lowered the price target on JD.com, Inc. (NASDAQ: JD) to $95 from $100 and kept a "Buy" rating on the shares. The rising regulatory overhang on Chinese internet companies, according to the analyst, has no end in sight. According to Kramer, companies are still subject to "incremental risk" due to the data privacy law, and the next focus will be on how companies alter their processes or how the Chinese government enforces rules.

The hedge fund chaired by Lei Zhang holds 3.68 million shares in JD.com, Inc. (NASDAQ: JD), worth over $293 million. Rishi Renjen’s ROAM Global Management is the most significant shareholder in JD.com, Inc. (NASDAQ: JD), with 90,300 shares worth more than $7 billion.

Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV), JD.com, Inc. (NASDAQ: JD) is one of the best stocks according to Chinese billionaire Lei Zhang.

In its second-quarter 2021 investor letter Arisaig Partners mentioned JD.com, Inc. (NASDAQ: JD). Here is what the fund said:

JD.com, for example, continues to display impressive operating momentum, with sales on track to grow around 30% this year by our estimates. Looking longer term, this company is making a credible claim to be the dominant player in Chinese grocery ecommerce, an enormous chunk of overall consumption in China, and the last one yet to move online in a big way. We think that JD has a clear advantage over rivals here thanks to its integrated and fully self-managed logistics capabilities. Whereas an offline big box retailer might have 10-20,000 SKUs, JD offers 8 million. 90% of orders fulfilled by JD Logistics can be delivered on the same day or the next day to 500 million customers. The fact that JD has just 30 days of inventory tells us that this is a highly-optimised fulfilment chain. It is very hard to be both fast and efficient, and in order to achieve this it is necessary to know what inventory to hold in which warehouse, and when to hold it (“right place, right time, right person”), a highly information-intensive challenge. The only other retailer that comes close to being able to manage that level of complexity is Amazon, and indeed these are capabilities that are very hard to replicate, taking decades of painstaking investment, trial and error testing, and data accumulation.…” (Click here to see the full text)

8. Airbnb, Inc. (NASDAQ: ABNB)

Zhang's Stake Value: $323,529,000 Percentage of Lei Zhang's 13F Portfolio: 3.33% Number of Hedge Fund Holders: 58

Airbnb, Inc. (NASDAQ: ABNB) and its subsidiaries provide a platform for guests to book stays and activities. The company was founded in 2007 and ranks eighth on the list of 10 best stocks to invest in according to Chinese billionaire Lei Zhang. Airbnb, Inc. (NASDAQ: ABNB) currently has a $91.43 billion market capitalization.

On August 17, Citi analyst Jason Bazinet raised the price target on Airbnb, Inc. (NASDAQ: ABNB) to $152 from $149 and kept a “Neutral” rating on the shares. On August 12, Airbnb, Inc. (NASDAQ: ABNB) announced earnings for the second quarter of 2021. It posted earnings per share of -$0.11, surpassing the estimates by $0.32. Revenue over the period was $1.34 billion, up 300% YoY, beating the analysts' predictions by $70 million.

Hillhouse Capital Management holds 2.11 million shares in Airbnb, Inc. (NASDAQ: ABNB), worth over $323 million, representing 3.33% of its portfolio.

Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV), Airbnb, Inc. (NASDAQ: ABNB) is one of the best stocks according to Chinese billionaire Lei Zhang.

Worm Capital LLC, in its second-quarter 2021 investor letter, mentioned Airbnb, Inc. (NASDAQ: ABNB). Here is what the fund said:

“Throughout the quarter, you may have noticed that we averaged into a significant position in Airbnb (ABNB). Though the stock has been a relative underperformer since its February highs, we are highly confident about the company’s prospects and its ability to generate meaningful compounded returns over time.…” (Click here to see the full text)

7. BridgeBio Pharma, Inc. (NASDAQ: BBIO)

Zhang's Stake Value: $326,868,000 Percentage of Lei Zhang's 13F Portfolio: 3.36% Number of Hedge Fund Holders: 27

BridgeBio Pharma, Inc. (NASDAQ: BBIO) is a pharmaceutical company that specializes in the research, development, and delivery of medicines for genetic illnesses. The company was founded in 2015 and is placed seventh on the list of 10 best stocks to invest in according to Chinese billionaire Lei Zhang. BridgeBio Pharma, Inc. (NASDAQ: BBIO) shares have offered investors returns exceeding 67% over the course of the past 12 months.

On August 5, BridgeBio Pharma, Inc. (NASDAQ: BBIO) posted earnings for the second quarter of 2021. The company declared earnings per share of -$0.66, beating the estimates by $0.31. In addition, the revenue over the period was $54.02 million, surpassing the expectations by $29.09 million. On July 27, Mizuho initiated coverage on BridgeBio Pharma, Inc. (NASDAQ: BBIO), rating it as "Buy" and gave a $86 price target.

Lei Zhang's Hillhouse Capital Management currently holds 5.36 million shares of BridgeBio Pharma, Inc. (NASDAQ: BBIO) that amounts to $326.87 million. BridgeBio occupies 3.36% of Hillhouse Capital Management’s total portfolio. Viking Global is a leading shareholder in BridgeBio Pharma, Inc. (NASDAQ: BBIO), with 26.62 million shares worth more than $1 billion.

Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV), BridgeBio Pharma, Inc. (NASDAQ: BBIO) is one of the best stocks according to Chinese billionaire Lei Zhang.

Baron Funds, in its second-quarter 2021 investor letter, mentioned BridgeBio Pharma, Inc. (NASDAQ: BBIO). Here is what Baron Funds has to say about BridgeBio in its letter:

BridgeBio Pharma, Inc. is a biotechnology company developing drugs that address a host of genetic disorders. Shares fell in the quarter given concerns around increasing competition. While we expect positive results from BridgeBio’s Phase 3 trial for its lead program for TTR amyloidosis, a disease in which toxic proteins build up in the heart and nerves, updates from Alnylam’s competing drug, Vitrusiran, and more recently, Intellia’s gene editing platform, pressured the stock. We retain conviction in BridgeBio given its pipeline and diversified business model.”

6. Zoom Video Communications, Inc. (NASDAQ: ZM)

Zhang's Stake Value: $397,635,000 Percentage of Lei Zhang's 13F Portfolio: 4.09% Number of Hedge Fund Holders: 59

Zoom Video Communications, Inc. (NASDAQ: ZM) is a company that specializes in video-based communication. It was incorporated in 2011 and is ranked sixth on the list of 10 best stocks to invest in according to Chinese billionaire Lei Zhang. Zoom Video Communications, Inc. (NASDAQ: ZM) shares have offered investors returns exceeding 14% over the course of the past 12 months.

On July 29, KeyBanc upgraded Zoom Video Communications, Inc. (NASDAQ: ZM) to “Overweight” with a $428 price target.

The hedge fund managed by Lei Zhang holds 1.03 million shares in Zoom Video Communications, Inc. (NASDAQ: ZM), worth over $397 million, representing 4.09% of their portfolio. In the second quarter of 2021, 59 hedge funds in Insider Monkey’s database of 873 funds held stakes in Zoom Video Communications, Inc. (NASDAQ: ZM) compared to 54 funds in the quarter earlier.

Just like Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), Alibaba Group Holding Limited (NYSE: BABA), and XPeng Inc. (NYSE: XPEV), Zoom Video Communications, Inc. (NASDAQ: ZM) is one of the best stocks according to Chinese billionaire Lei Zhang.

Artisan Partners, in its first quarter 2021 investor letter, mentioned Zoom Video Communications, Inc. (NASDAQ: ZM). Here is what the fund said:

“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”

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Disclosure: None. 10 Best Stocks to Invest In According to Chinese Billionaire Lei Zhang is originally published on Insider Monkey.