U.S. Markets closed

Matthews China Fund Buys 8 Stocks in 1st Quarter

- By James Li

The Matthews China Fund (Trades, Portfolio) disclosed this week it established eight new holdings during the first quarter, a period of recovery for the Chinese equity market.


Overseen by lead manager Andrew Mattock and co-manager Winnie Chwang, the fund seeks long-term capital appreciation primarily in common and preferred stocks of companies located in China and Hong Kong. According to the shareholder letter, the fund returned 24.08% during the quarter, outperforming the MSCI China Index's return of 17.69%.

eae1eb80-6d15-11e9-9d03-4f020bd9f4e0.png

Fund sees rebound potential in China as trade talks improve

The letter said China's equity market "staged a sharp recovery" during the quarter, driven by several factors, which include improving optimism on U.S.-China trade talks. Additionally, the letter said low valuation levels in China's A-share market during 2018 presented a buying opportunity, further contributing to strong market performance.

In light of the rebound, the fund introduced eight companies to its portfolio during the quarter: Ping An Insurance (Group) Co. of China Ltd. (601318.SS), Kweichow Moutai Co. Ltd. (600519.SS), Ctrip.com International Ltd. (CTRP), Anhui Conch Cement Co. Ltd. (600585.SS), Tencent Music Entertainment Group (TME), Focus Media Information Technology Co. Ltd. (002027.SZ), Luxshare Precision Industry Co. Ltd. (002475.SZ) and China Overseas Property Holdings Ltd. (HKSE:02669).

Ping An Insurance

The fund purchased 1.548 million shares of Ping An Insurance, giving the stake 2.18% equity portfolio space. Shares averaged 65.56 yuan ($9.73) during the quarter.

5bd645a0-6d18-11e9-b91f-55855bfafbec.png

The Shenzhen, Guangdong-based insurance company provides life insurance and property and casualty insurance. GuruFocus ranks the company's business predictability three stars out of five on consistent revenue growth over the past 10 years: Ping An Insurance's three-year revenue growth rate of 17% is outperforming 91.14% of global competitors.

Kweichow Moutai

The fund purchased 138,589 shares of Kweichow Moutai, giving the position 2.16% equity portfolio space. Shares averaged 713.22 yuan during the quarter.

7087ba00-6d19-11e9-abf5-a7e649c4500b.png

The Renhuai, Guizhou-based company manufactures liquor products like the 53-degree Flying Moutai, a type of liquor consumed primarily during high-profile historical and political events.

344970561.png

GuruFocus ranks Kweichow Moutai's financial strength and profitability 10 out of 10 on several positive signs, which include no long-term debt, a strong Piotroski F-score of 7 and operating margins that are outperforming 98.60% of global competitors despite contracting 1.8% per year over the past five years. Additionally, the company's business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.

17966984.png

Other funds joining the Kweichow Moutai party include Hong Kong-based Value Partners (Trades, Portfolio) and the Matthews Pacific Tiger Fund (Trades, Portfolio).

Ctrip

The fund purchased 321,000 shares of Ctrip, giving the holding 1.72% equity portfolio space. Shares averaged $34.89 during the quarter.

2ff16ff0-6d1b-11e9-93f6-7bc731719664.png

The Shanghai-based company offers various hotel and air ticketing reservation services. GuruFocus ranks the company's financial strength 5 out of 10 and profitability 7 out of 10: Even though the company has a weak Piotroski F-score of 3 and Altman Z-score of 1.73, Ctrip's three-year revenue growth rate outperforms 88.34% of global competitors.

1908331673.png

Anhui Conch Cement

The fund purchased 2,299,729 shares of Anhui Conch Cement, giving the position 1.60% equity portfolio space. Shares averaged 33.51 yuan during the quarter.

4bc0a2c0-6d1c-11e9-8192-5b95c3ea1550.png

The Wuhu, Anhui-based company produces various types of cement for infrastructure and residential construction. GuruFocus ranks the company's profitability 10 out of 10 on several positive signs, which include a strong Piotroski F-score of 8 and operating margins that are outperforming 95.25% of global competitors. Additionally, the company's business predictability ranks 4.5 stars out of five on strong and consistent revenue and earnings growth over the past 10 years.

1157453746.png

Tencent Music Entertainment

The fund purchased 713,100 shares of Tencent Music Entertainment, giving the holding 1.59% equity portfolio space.

2f31b460-6d1d-11e9-b3e7-b72338c75190.png

GuruFocus ranks Tencent Music Entertainment's financial strength 9 out of 10 on several strong indicators, which include no long-term debt and a robust Altman Z-score of 18.27.

Focus Media Information Technology

The fund purchased 7,836,367 shares of Focus Media Information Technology, giving the position 0.90% equity portfolio space.

ca314490-6d1d-11e9-ba21-3f15d5588cb7.png

GuruFocus ranks the company's financial strength 7 out of 10: Even though the Piotroski F-score ranks just 4 out of 10, Focus Media's Altman Z-score of 17.76 suggests little or no financial distress.

Luxshare Precision

The fund purchased 1,202,127 shares of Luxshare Precision, giving the stake 0.54% equity portfolio space. Shares averaged 18.42 yuan during the quarter.

d2aedee0-6d20-11e9-b464-23341a25b925.png

The Dongguan, Guangdong-based company engages in the research, manufacture and marketing of 3C and automobile connectors in China. GuruFocus ranks the company's profitability 9 out of 10 on several positive signs, which include a five-star predictability rank and a three-year revenue growth rate that outperforms 95.36% of global competitors.

248197974.png

China Overseas Property Holdings

The fund purchased 225,000 shares of China Overseas Property Holdings, giving the position 0.07% equity portfolio space. Shares averaged 2.77 Hong Kong dollars (35 cents) during the quarter.

cfe9b2c0-6d21-11e9-9ef6-230217b0b022.png

The Hong Kong-based company provides real estate services through two business segments: property management services and value-added services. GuruFocus ranks the company's financial strength 7 out of 10 on several positive signs, which include a strong Altman Z-score of 5.05 and a solid Piotroski F-score of 6.

Disclosure: No positions.

Read more here:

  • David Nadel's Top 5 Buys in 1st Quarter
  • The Vanguard Health Care Fund's Top 5 Buys of the 1st Quarter
  • Buffett's Market Indicator Reaches 144.4% Ahead of Berkshire Shareholder Meeting



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here .

This article first appeared on GuruFocus.