Hong Kong-based asset management firm Value Partners (Trades, Portfolio) has revealed its portfolio for the first half of 2021. Top trades for the period include selling out of Vipshop Holdings Ltd. (VIPS, Financial), Wuliangye Yibin Co. Ltd. (SZSE:000858, Financial) and United Microelectronics Corp. (TPE:2303, Financial) and an addition to the firm’s top position in Tencent Holdings Ltd. (HKSE:00700, Financial). The firm also made a significant reduction in its Pinduoduo Inc. (PDD, Financial) holding.
The firm employs a bottom-up approach to stock selection that is based on a value investing discipline. By focusing on intensive fundamental research, managers are able to find companies that are the right businesses, run by the right people and are trading at the right price.
Portfolio overview
Through the first half of the year, the firm’s portfolio contained 42 stocks with 13 new holdings. It was valued at $1.74 billion and has seen a turnover rate of 33%. Top holdings include Tencent, Taiwan Semiconductor Manufacturing Co. Ltd. (TPE:2330, Financial), China Merchants Bank Co. Ltd. (HKSE:03968, Financial), Li Ning Co. Ltd. (HKSE:02331, Financial) and Kweichow Moutai Co. Ltd. (SHSE:600519, Financial).
The top represented sectors are consumer cyclical (20.61%), technology (16.96%) and financial services (16.05%).
Vipshop
The firm’s Vipshop (VIPS, Financial) holding was sold out for the third time during the first half of the year. The 2.66 million shares were sold throughout the period at an average price of $25.25. Overall, the sale had a -4.97% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 24.15%.
Vipshop is an online discount retailer for brands in China. The company offers branded products to consumers in China through flash sales on its vipshop.com, vip.com and lefeng.com websites. Flash sales represent an online retail format, combining the advantages of e-commerce and discount sales through selling a finite quantity of discounted products or services online for a limited period of time. It deals in a wide range of products and services for consumers specializing in branded cosmetics, apparel, health care products, food and other consumer products. Its operating segments include Vip.com and Shan Shan Outlets. The company generates maximum revenue from the Vip.com segment.
On Aug. 31 the stock was trading at $14.77 per share with a market cap of $10 billion. According to the GF Value Line, the stock is trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 8 out of 10 and a profitability rank of 7 out of 10. There are currently two severe warning signs issued for assets growing faster than revenue and a declining gross margin. Thanks to strong results through 2020, the company’s cash-to-debt ratio of 5.68 ranks it better than 84.60% of industry competitors.
Top guru shareholders in Vipshop (VIPS, Financial) include Jim Simons (Trades, Portfolio) Renaissance Technologies, Sarah Ketterer (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Wuliangye Yibin
The firm also sold out of its Wuliangye Yibin (SZSE:000858, Financial) holding. The firm sold 1.59 million shares that traded at an average price of 289.36 Chinese yuan ($44.79). GuruFocus estimates the total gain of the holding at 45.35% and the sale had a -4.71% impact on the equity portfolio overall.
Wuliangye Yibin is China's leading liquor producer by revenue and capacity. Founded in the 1950s, the company is based in Yibin, Sichuan province, in southwest China.
As of Aug. 31, the stock was trading at 201.69 Chinese yuan per share with a market cap of 782.88 billion yuan. The stock is trading at a modestly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 9 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There are currently no severe warning signs issued for the company. The company’s strong profitability rank is propped up by exceptional operating and net margins that exceed at least 96% of competitors in the alcoholic beverages industry.
The Matthews China Fund (Trades, Portfolio) also maintains a position in Wuliangye Yibin (SZSE:000858, Financial).
Tencent
The firm boosted its position in Tencent (HKSE:00700, Financial) by 64.56% with the purchase of an additional 885,800 shares. The shares were purchased at an average price of 638.32 Hong Kong dollars ($82.09), landing the firm at a total estimated gain of 15.43% on the position. Overall, the transaction had a 3.83% impact on the equity portfolio.
Tencent is a Chinese Internet giant with businesses and investments in a wide variety of internet services and content. Major services include communication and social networking (Weixin/Weixin and QQ), online PC and mobile games, content (news, videos, music, comics and literature), utilities (email, app store, mobile security and mobile browser), cloud services and financial technology.
The stock was trading at 481.20 Hong Kong dollars with a market cap of 4.63 trillion Hong Kong dollars on Aug. 31. The GF Value Line shows the stock trading at a modestly undervalued rating after prices have been in decline.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 10 out of 10 and a valuation rank of 9 out of 10. There are currently two severe warning signs issued for declining gross and operating margins. Despite the company’s strong profitability rank, its return on invested capital has decreased significantly over the last decade, indicating potential issues with capital efficiency.
Tencent also counts the Matthews Pacific Tiger Fund (Trades, Portfolio), the Matthews China Fund (Trades, Portfolio) and Bestinfond (Trades, Portfolio) as guru shareholders.
Pinduoduo
The firm pulled back its Pinduoduo position after it was established last year. The sale of 310,621 shares reduced the holding by 38.95%. The shares sold at an average price of $149.45. Overall, the sale had a -3.66% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 12.87%.
Pinduoduo provides a platform for fun and interactive shopping experiences. The company’s mobile platform offers a social shopping experience that leverages social networks as an effective and efficient tool for buyer acquisition and engagement. The company's revenue is derived from the People's Republic of China.
On Aug. 31, the stock was trading at $99.11 per share with a market cap of $124.21 billion. According to the GF Value Line, the stock is trading at a significantly undervalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 1 out of 10. There are currently no severe warning signs issued for the company. Revenue has been on the rise for the company over the last year as the pandemic has continued to drive demand for online shopping.
Other top guru shareholders include Baillie Gifford (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Fisher, Catherine Wood (Trades, Portfolio) and Dalio.
United Microelectronics
The firm sold out of its freshly acquired holding in United Microelectronics (TPE:2303, Financial) to round out its top five trades. The 29.68 million shares that were purchased in the second half of 2020 were sold at an average price of 52.28 New Taiwan dollars ($1.89). GuruFocus estimates that the firm netted a 75.91% gain on the short-term holding and the sale had a -3.30% impact on the equity portfolio overall.
Founded in 1980, UMC is the world's third-largest dedicated chip foundry, with 7% market share in 2020 according to Gartner. UMC's headquarters are in Hsinchu, Taiwan, and it operates in Taiwan, mainland China, Japan and Singapore, with additional sales offices in Europe, the U.S. and South Korea. UMC features a diverse customer base, including Texas Instruments, MediaTek, Qualcomm, Broadcom, Xilinx and Realtek.
As of Aug. 31, the stock was trading at NT$62.80 per share with a market cap of NT$773.57 billion. The stock is trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 2 out of 10. There is currently one severe warning sign issued for a declining gross margin percentage. The company’s cash flows have been on the rise and are easily able to support dividend payouts.
