The Matthews Pacific Tiger Fund (Trades, Portfolio) disclosed this week its top five buys for the second quarter included three new positions and increased bets in two existing holdings.
Overseen by lead manager Sharat Shroff, the fund seeks long-term capital appreciation primarily through investments in securities trading in Asian markets except Japan. According to the latest fund commentary, the Pacific Tiger Fund returned 7.63% for the first six months of the year, underperforming the MSCI Asia Ex Japan Index's return of 10.83%.
Fund comments on first-half "roller-coaster ride"
The fund’s quarterly letter said that while Asian markets rallied at the start of the year, led by Chinese securities, volatility “flared” in May as President Trump increased tariffs on $200 billion worth of Chinese goods from 10% to 25%. Despite this, markets rebounded in June and early July as the “tone of trade dialogue” between the U.S. and China improved following the G-20 Summit in late June.
As of quarter-end, the fund’s $8.64 billion equity portfolio contains 60 stocks, of which six represent new holdings. The fund’s top sectors in terms of portfolio weight are financial services, consumer staples and technology.
For the quarter, the fund’s top three new positions were DKSH Holding Ltd. (XSWX:DKSH), PT Mitra Keluarga Karyasehat Tbk (ISX:MIKA, Financial) and Wise Talent Information Technology Co. Ltd. (HKSE:06100, Financial). The fund’s remaining top buys were position boosts of Alibaba Group Holding Ltd. (BABA, Financial) and iQiyi Inc. (IQ, Financial).
DKSH Holding
The fund purchased 4,039,869 shares of DKSH Holding, giving the stake 2.74% weight in the equity portfolio. Shares averaged 60.36 Swiss francs ($61.44) during the quarter.
The Zurich-based company offers market expansion services in Asia, with services ranging from sourcing, marketing, sales, distribution and after-sales services. GuruFocus ranks the company’s financial strength 7 out of 10 on several positive indicators, including a strong Altman Z-score of 3.55 and debt ratios outperforming over 66% of global competitors.
PT Mitra Keluarga Karyasehat Tbk
The fund purchased 383,065,700 shares of PT Mitra Keluarga Karyasehat Tbk, giving the position 0.59% weight in the equity portfolio. Shares averaged 1,985.70 rupiah (14 cents) during the quarter.
The Jakarta, Indonesia-based company operates medial care facilities under the name Mitra Keluarga. GuruFocus ranks the company’s financial strength and profitability 7 out of 10 on several positive signs, which include a solid Piotroski F-score of 6, a robust Altman Z-score of 25.31 and operating margins that are outperforming 96% of global competitors. Despite this, the company’s three-year Ebitda growth of 5.10% underperforms 83.45% of global health care providers.
Wise Talent Information Technology
The fund purchased 16,143,400 shares of Wise Talent Information Technology, giving the holding 0.50% equity portfolio weight. Shares averaged 20.98 Hong Kong dollars ($2.68) during the quarter.
GuruFocus ranks the company’s financial strength 8 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7, a solid Altman Z-score of 6.74 and an equity-to-asset ratio that outperforms 88.44% of global competitors.
Alibaba
The fund added 621,300 shares of Alibaba, increasing the position 57.08% and the equity portfolio 1.22%. Shares averaged $172.54 during the quarter.
GuruFocus ranks the Chinese online retail giant’s profitability 8 out of 10: Operating margins are outperforming 89.35% of global competitors despite contracting 15.6% per year on average during the past five years. Additionally, the company’s three-year revenue growth rate of 53.40% outperforms 95.42% of global competitors.
IQiyi
The fund added 2,425,800 shares of iQiyi, increasing the stake 182.58% and the equity portfolio 0.58%.
GuruFocus lists a few warning signs for iQiyi, including an Altman Z-score that suggests possible financial distress and a cash-to-debt ratio that underperforms 73.83% of global competitors.
Disclosure: No positions.
Read more here:
- US Markets Remain Significantly Overvalued Despite Late-Summer Cooldown
- Matthews China Fund’s Top 5 Buys of the 2nd Quarter
- David Nadel’s Top 5 Buys of the 2nd Quarter
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