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Sydnee Gatewood
Sydnee Gatewood
Articles (2467) 

Matthews Pacific Tiger Fund Buys 3 Stocks in 3rd Quarter

Fund’s largest new holding is convenience store chain

The Matthews Pacific Tiger Fund (Trades, Portfolio), part of Matthews International Capital Management, disclosed three new positions in its third-quarter equity portfolio, which was released earlier this week.

Managed by Sharat Shroff, Rahul Gupta, Raymond Deng and Inbok Song, the San Francisco-based fund invests mostly in Asian companies, excluding Japan, in order to achieve long-term capital appreciation. The fund managers look for companies that are capable of sustainable growth.

Based on these criteria, the fund established holdings in President Chain Store Corp. (TPE:2912), Tencent Music Entertainment Group (NYSE:TME) and Hugel Inc. (XKRX:145020) during the quarter.

President Chain Store

Having previously exited a position in President Chain Store in the second quarter, the fund entered a new 15.27 million-share stake. The trade had an impact of 1.69% on the equity portfolio. The stock traded for an average price of 296.17 New Taiwan dollars ($9.74) per share during the quarter.

The Taiwanese convenience store chain has a market cap of NT$320.2 billion; its shares close at NT$308 on Tuesday with a price-earnings ratio of 30.46, a price-book ratio of 9.21 and a price-sales ratio of 1.27.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.


GuruFocus rated President Chain Store’s financial strength 5 out of 10. In addition to adequate interest coverage, the Altman Z-Score of 3.09 indicates the company is in good standing financially.

The company’s profitability scored an 8 out of 10 rating, driven by operating margin expansion, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, which implies business conditions are stable. Despite recording consistent earnings and revenue growth, President Chain Store’s business predictability rank of three out of five stars is on watch. According to GuruFocus, companies with this rank typically see their stocks gain an average of 8.2% per annum over a 10-year period.

The Pacific Tiger Fund holds 1.47% of the company’s outstanding shares.

Tencent Music Entertainment

Matthews invested in 3.46 million shares of Tencent Music Entertainment, dedicating 0.53% of the equity portfolio to the stake. Shares traded for an average price of $14.08 during the quarter.

The Chinese music streaming service has a market cap of $22.29 billion; its shares were trading around $13.53 on Wednesday with a price-earnings ratio of 80.26, a price-book ratio of 3.98 and a price-sales ratio of 6.92.

According to the Peter Lynch chart, the stock is overvalued.


Tencent Music’s financial strength was rated 9.2 out of 10 by GuruFocus, driven by comfortable interest coverage and a robust Altman Z-Score of 12.07, which suggests the company is in good financial health.

The company’s profitability did not fare as well, scoring a 4 out of 10 rating despite having margins and returns that outperform over half of industry peers. Tencent also has a moderate Piotroski F-Score of 4.

With its purchase of 0.21% of outstanding shares, the fund became the company’s largest guru shareholder. Other top guru investors include Chase Coleman (Trades, Portfolio), Value Partners (Trades, Portfolio), Ron Baron (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).


The Pacific Tiger Fund picked up 27,266 shares of Hugel, allocating 0.10% of the equity portfolio to the holding. During the quarter, the stock traded for an average per-share price of 375,339 won ($323.84).

The South Korean biopharmaceutical company, which focuses on developing beauty products like botulinum toxin and fillers, has a market cap of 1.87 trillion won; its shares closed at 376,100 won on Tuesday with a price-earnings ratio of 24.64, a price-book ratio of 2.36 and a price-sales ratio of 8.79.

Based on the Peter Lynch chart, the stock appears to be overvalued.


GuruFocus rated Hugel’s financial strength 7.8 out of 10. In addition to sufficient interest coverage, the company is supported by a high Altman Z-Score of 10.76.

The company’s profitability scored a 5 out of 10 rating on the back of strong margins, returns that outperform over half of its competitors and a moderate Piotroski F-Score of 5.

The fund holds 0.55% of the company’s outstanding shares.

Additional trades

During the quarter, the fund managers also boosted their holdings of several companies, including Alibaba Group Holding Ltd. (NYSE:BABA), China East Education Holdings Ltd. (HKSE:00667), Housing Development Finance Corp. Ltd. (BOM:500010), iQiyi Inc. (IQ), China Resources Land Ltd. (HKSE:01109) and GT Capital Holdings Inc. (PHS:GTCAP).

The Pacific Tiger Fund’s $8.42 billion equity portfolio, which is composed of 60 stocks, is largely invested in the financial services and consumer defensive sectors.


According to its website, the fund posted an -11.11% return in 2018. Its benchmark, the MSCI All Country Asia ex Japan Index, posted a return of -14.37% for the same period.

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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