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Top 10 Stock Picks of Chinese Billionaire Lei Zhang

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·9 min read
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  • PDD
  • BBIO
  • DASH
  • CRM
  • MDLZ
  • BABA
  • JD

In this article, we discuss the top 10 stock picks of the Chinese billionaire Lei Zhang. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Stock Picks of Chinese Billionaire Lei Zhang.

Lei Zhang founded Hillhouse Capital Management in 2005, and serves as the chairman and chief executive officer of the investment management firm, overseeing a portfolio valued at $7.64 billion as per the latest 13F filings from September 2021. Zhang is one of the top Asian investors, with a portfolio focused on the media, consumer, industrial and commodity-related sectors. With a top ten holdings concentration of 69.19%, the largest security in Zhang’s Q3 portfolio is BeiGene, Ltd. (NASDAQ:BGNE), which represents 25.98% of the Hillhouse Capital Management's total investments.

Lei Zhang completed his Bachelor’s degree in economics from Renmin University of China in 1994, and received an MBA from Yale University in 2002. At Hillhouse Capital Management, Zhang manages capital on behalf of global institutions such as non-profit foundations and pension funds. The investment management firm holds stakes in top-notch businesses for the long run, investing across companies offering growth and buyout opportunities.

Top 10 Stock Picks of Chinese Billionaire Lei Zhang
Top 10 Stock Picks of Chinese Billionaire Lei Zhang

Lei Zhang of Hillhouse Capital Management

The most notable stocks in Lei Zhang’s investment portfolio as of September this year include Pinduoduo Inc. (NASDAQ:PDD), JD.com, Inc. (NASDAQ:JD), Alibaba Group Holding Limited (NYSE:BABA), and Mondelez International, Inc. (NASDAQ:MDLZ), among others discussed in detail below.

Our Methodology

We used the Q3 portfolio of Lei Zhang’s Hillhouse Capital Management to select the billionaire’s top 10 stocks. To give readers meaningful context regarding each company, we mention the Q3 earnings, analyst ratings, and the hedge fund sentiment surrounding the holdings.

Top Stock Picks of Chinese Billionaire Lei Zhang

10. DoorDash, Inc. (NYSE:DASH)

Hillhouse Capital Management’s Stake Value: $246,414,000

Percentage of Hillhouse Capital Management’s 13F Portfolio: 3.22%

Number of Hedge Fund Holders: 42

DoorDash, Inc. (NYSE:DASH) is the largest American food delivery platform from California, operating in the United States, Australia, and Canada. Zhang’s Hillhouse Capital Management holds a $246.4 million stake in DoorDash, Inc. (NYSE:DASH) as of September 2021, which represents 3.22% of the firm’s Q3 investments.

DoorDash, Inc. (NYSE:DASH) posted its Q3 results on November 9. EPS for the quarter equaled $0.43, beating estimates by $0.32. The $1.27 billion revenue also exceeded estimated revenue by $98.79 million. KGI Securities analyst Andrew Cheng on November 22 upgraded DoorDash, Inc. (NYSE:DASH) to Outperform from Neutral with a $270 price target.

As of the third quarter of 2021, 42 hedge funds were bullish on DoorDash, Inc. (NYSE:DASH), down from 45 in the preceding quarter. The total value of these stakes amounted to $9.35 billion. Chase Coleman and Feroz Dewan’s Tiger Global Management LLC is the leading stakeholder in DoorDash, Inc. (NYSE:DASH), with over 11 million shares valued at $2.27 billion.

In addition to Pinduoduo Inc. (NASDAQ:PDD), JD.com, Inc. (NASDAQ:JD), Alibaba Group Holding Limited (NYSE:BABA), and Mondelez International, Inc. (NASDAQ:MDLZ), DoorDash, Inc. (NYSE:DASH) is a notable stock in Zhang’s Q3 portfolio.

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

Hillhouse Capital Management’s Stake Value: $251,318,000

Percentage of Hillhouse Capital Management’s 13F Portfolio: 3.28%

Number of Hedge Fund Holders: 28

BridgeBio Pharma, Inc. (NASDAQ:BBIO) is a biopharmaceutical company engaged in manufacturing life-changing drugs for genetic diseases and cancers with clear genetic drivers. Lei Zhang owns 5.36 million shares in BridgeBio Pharma, Inc. (NASDAQ:BBIO), worth $251.3 million as of Q3 2021, representing 3.38% of Zhang’s stock portfolio.

Andreas Halvorsen’s Viking Global is the leading BridgeBio Pharma, Inc. (NASDAQ:BBIO) stakeholder as of September, holding a $1.24 billion position in the company. Overall, 28 hedge funds in the database of Insider Monkey’s 867 elite funds were long BridgeBio Pharma, Inc. (NASDAQ:BBIO) in Q3, with a total stake value of $2.1 billion.

BridgeBio Pharma, Inc. (NASDAQ:BBIO) posted its Q3 results on November 4, with EPS for the quarter being -$1.06, missing estimates by -$0.13. The $2.34 million revenue was down 71.16% from the prior-year quarter, missing expected revenue by -$13.78 million.

Here is what Baron Opportunity Fund has to say about BridgeBio Pharma, Inc. (NASDAQ:BBIO) in its Q2 2021 investor 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, encouraging updates from Alnylam’s competing drug, Vitrusiran, and more recently, Intellia’s gene editing platform, pressured the stock. We exited our position.”

8. Pinduoduo Inc. (NASDAQ:PDD)

Hillhouse Capital Management’s Stake Value: $254,601,000

Percentage of Hillhouse Capital Management’s 13F Portfolio: 3.32%

Number of Hedge Fund Holders: 49

Pinduoduo Inc. (NASDAQ:PDD) is an agriculture-focused Chinese technology company, working diligently to connect farmers directly with customers, creating an immersive and straightforward shopping experience. Zhang holds a $254.6 million stake in Pinduoduo Inc. (NASDAQ:PDD), which accounts for 3.32% of his Q3 investments.

At the end of the third quarter of 2021, 49 hedge funds from Insider Monkey’s database reported owning stakes in Pinduoduo Inc. (NASDAQ:PDD), valued at $3.53 billion. This is compared to the same number of hedge funds in the prior quarter, with a total stake value of $5.27 billion. One of the leading stakeholders of the company is Eashwar Krishnan’s Tybourne Capital Management, holding a $317 million stake.

Barclays analyst Jiong Shao initiated coverage of Pinduoduo Inc. (NASDAQ:PDD) with an Equal Weight rating and a $103 price target. The analyst gave a broader comment that China, as the second largest world economy, cannot be ignored as a lucrative investment avenue, rating the Chinese technology sector with a Positive view.

Here is what Baillie Gifford has to say about Pinduoduo Inc. (NASDAQ:PDD) in its Q2 2021 investor letter:

“As many countries enjoy a relaxation of Covid restrictions, Mr Market is focussed on short-term beneficiaries of ‘the pleasure after the plague’. There are interesting parallels with the Roaring 20s here, but to our minds, they extend beyond post-pandemic hedonism. Much of the new wealth created in the 1920s was patchily distributed and accompanied by a pervasive sense that the older generation had let down younger people. In 1920, John F. Carter, an irate 23-year-old wrote “the older generation had certainly pretty well ruined this world before passing it on to us. We have been forced to live in an atmosphere of ‘tomorrow we die,’ and so, naturally, we drank and were merry.”

In a similar vein, some of the greatest Growth opportunities are materialising from the companies that are shifting humankind towards more sustainable ways of consuming by driving efficiencies and eliminating surplus. Pinduoduo’s ‘farm to table’ platform is one example – cutting out huge waste in farm produce and short circuiting layers of infrastructure by matching Chinese food supply and demand through a group buying model. In a similar vein, Meituan is well on the way to developing China’s primary ‘Software as a Service’ ecosystem for food distribution which we believe has a strong chance of replacing wasteful wet markets as the primary channel for transacting in produce.

Pinduoduo’s share price pulled back following news that Chinese regulators are investigating possible anti-competitive activities by the country’s large online companies. However, Pinduoduo appears well placed to navigate such regulatory scrutiny in the long-term, helped in part by its community-buying business model that benefits consumers, manufacturers and farmers alike. Its business fundamentals are stellar– the company remains the largest Chinese e-commerce platform, with over 820 million annual active users (surpassing Alibaba and JD.com), while revenue growth increased by 239% over the previous year.”

7. iQIYI, Inc. (NASDAQ:IQ)

Hillhouse Capital Management’s Stake Value: $310,347,000

Percentage of Hillhouse Capital Management’s 13F Portfolio: 4.05%

Number of Hedge Fund Holders: 23

iQIYI, Inc. (NASDAQ:IQ) is an online streaming platform offering Asian TV shows and movies. iQIYI, Inc. (NASDAQ:IQ) represents 4.05% of Lei Zhang’s Q3 portfolio, with the Chinese billionaire holding 38.6 million shares in the company, valued at $310.3 million.

As of Q3 2021, 23 hedge funds were long iQIYI, Inc. (NASDAQ:IQ), down from 27 in the preceding quarter. The total stake value amounted to $476.6 million, with Hillhouse Capital Management being the leading stakeholder.

iQIYI, Inc. (NASDAQ:IQ) announced on November 17 its Q3 earnings. EPS in the quarter totaled -$0.34, beating estimates by $0.01. The $1.19 billion revenue was up 9% year-over-year, exceeding expected revenue by $0.62 million.

Citi analyst Alicia Yap on November 18 lowered the price target on iQIYI, Inc. (NASDAQ:IQ) to $8.80 from $10 and kept a Neutral rating on the shares, following the Q3 results and the lack of a near-term catalyst.

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

Hillhouse Capital Management’s Stake Value: $340,158,000

Percentage of Hillhouse Capital Management’s 13F Portfolio: 4.44%

Number of Hedge Fund Holders: 119

Lei Zhang’s Hillhouse Capital Management owns 1.25 million shares in salesforce.com, inc. (NYSE:CRM), as of Q3 2021, worth $340.1 million, representing 4.44% of the firm’s 13F securities. salesforce.com, inc. (NYSE:CRM) is a California-based technology company offering enterprise software for customer relationship management, marketing automation, data analytics, and application development.

Fisher Asset Management is the leading salesforce.com, inc. (NYSE:CRM) stakeholder out of the 119 hedge funds that reported owning stakes in the company as of September this year, with the investment firm holding a $3.77 billion position in salesforce.com, inc. (NYSE:CRM).

salesforce.com, inc. (NYSE:CRM) was awarded an Overweight rating with a $360 price target on November 22 by analyst Peter Sazel from the investment advisory Atlantic Equities. He views salesforce.com, inc. (NYSE:CRM) as a low risk investment in the tech sector, with features that are hard to replicate.

In addition to Pinduoduo Inc. (NASDAQ:PDD), JD.com, Inc. (NASDAQ:JD), Alibaba Group Holding Limited (NYSE:BABA), and Mondelez International, Inc. (NASDAQ:MDLZ), salesforce.com, inc. (NYSE:CRM) is a notable stock in Zhang’s Q3 portfolio.

Here is what Polen Capital has to say about salesforce.com, inc. (NYSE:CRM) in its Q3 2021 investor letter:

“Salesforce came under pressure earlier in the year after agreeing to purchase Slack for about $26 billion. Since then, management has articulated well the strategic rationale and integration of Slack into its other software offerings and has demonstrated continued double-digit organic revenue growth within its legacy product offerings. At its recent investor day, the company also outlined long-term growth plans in line with our estimates but probably above what others may have been expecting, especially on margin expansion.”

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Disclosure: None. Top 10 Stock Picks of Chinese Billionaire Lei Zhang is originally published on Insider Monkey.