Point72 Asset Management leader Steven Cohen (Trades, Portfolio) disclosed a 5.1% stake in Luckin Coffee Inc. (LK, Financial) on Tuesday.
With the goal of generating superior risk-adjusted returns, the guru’s Stamford, Connecticut-based hedge fund uses long, short, macro and systematic strategies.
According to GuruFocus Real-Time Picks, a Premium feature, Cohen invested in 17 million shares of the Chinese coffee chain on Aug. 5, allocating 1.73% of the equity portfolio to the holding. The stock traded for an average price of $22.75 per share.
The coffee company, whose use of technology could prove to be tough competition for Starbucks Corp. (SBUX, Financial) in China, has a $5.39 billion market cap; its shares were trading around $22.91 on Wednesday with a price-book ratio of 15.81.
GuruFocus estimates the stock has gained 9% since its initial public offering in May.
Company overview
Founded in 2017, Luckin has opened thousands of stores in China over the past two years in an attempt to steal market share from Starbucks. It hopes to surpass the popular Seattle-based coffee brewer in the number of open locations this year. The Nikkei Asian Review reported that in a market where Starbucks has over 3,600 stores, Luckin’s fast delivery and app-based purchasing model has quickly won over younger consumers.
The company is also looking to grow outside of China. On July 22, Luckin announced it entered an agreement with Kuwait-based The Americana Group to launch a coffee retail business in the Middle East and India.
In a statement, founder and CEO Jenny Qian Zhiya said the deal represents “Luckin Coffee’s first step toward bringing its leading products from China to the world.”
“We look forward to further expanding the freshly brewed coffee market internationally as we realize the incredible growth opportunities available to us through our innovative business model,” she added.
Forbes reported Luckin recorded a $241 million net loss on $125 million in revenue last year. The company is scheduled to report its second-quarter earnings before the opening bell on Aug. 14.
GuruFocus has rated Luckin Coffee’s financial strength 5 out of 10 and its profitability and growth 2 out of 10.
Portfolio composition
Cohen’s $22.03 billion equity portfolio, which was composed of 989 stocks as of the end of the first quarter, is heavily invested in the consumer cyclical sector, followed by smaller holdings in the technology, health care and energy sectors.
The billionaire investor previously had a position in Starbucks, but divested of it in the first quarter.
Disclosure: No positions.
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