In light of increasing trade optimism between the U.S. and China and a major merger announcement within specialty retail, four Chinese retail companies broadly owned by gurus are Alibaba Group Holding Ltd. (BABA, Financial), JD.com Inc. (JD, Financial), Vipshop Holdings Ltd. (VIPS, Financial) and Jumei International Holding Ltd. (JMEI, Financial) according to the All-in-Ane Screener, a GuruFocus Premium feature.
Dow soars on increased U.S.-China trade optimism
On Monday, the Dow Jones Industrial Average closed at 28,066.34, up 190.72 points from Friday’s close of 27,875.62 on news that the U.S. and China might agree to phase one of their trade deal by the end of this year. Stocks that propelled the Dow included Apple Inc. (AAPL, Financial), the top holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), and Intel Corp. (INTC, Financial).
According to CNBC, U.S. national security adviser Robert O’Brien said in a security conference in Halifax, Nova Scotia that the U.S. and China still expect to complete phase one of the trade deal by the end of the year despite geopolitical concerns in Hong Kong and the South China Sea. President Trump added that while he stands with Hong Kong, the U.S. is “in the process of making the largest trade deal in history” with his friend, Chinese President Xi Jinping.
French luxury retail company agrees to acquire jewelry maker
Also on Monday, French luxury retailer LVMH Moet Hennessy Louis Vuitton (MIL:LVMH)Â and New York-based jeweler Tiffany & Co. (TIF, Financial) announced that the two companies have reached a definitive agreement in which Louis Vuitton will acquire Tiffany for $135 per share in cash, a transaction valued at approximately 14.7 billion euros ($16.2 billion). The merger, which both companies’ board of directors unanimously approved, is expected to close in mid-2020, subject to customary closing conditions.
Louis Vuitton CEO Bernard Arnault said he is pleased to welcome Tiffany to the fashion house's family. According to the joint press release, the acquisition aims to bolster Louis Vuitton’s position in jewelry and further increase its presence in the U.S.
GuruFocus Screener identifies opportunities in Chinese retail stocks
Given increased trade optimism between the U.S. and China and the Louis Vuitton–Tiffany merger, the Screener sought Chinese retail companies that are owned by at least two of our gurus. GuruFocus’ most-broadly held strategy has outperformed the Standard & Poor’s 500 Index benchmark over the past three years.
Alibaba
At least 13 gurus own shares of Alibaba according to the Screener results. Gurus with large positions in the Hangzhou, Zhejiang-based retail giant include PRIMECAP Management (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Chase Coleman (Trades, Portfolio)’s Tiger Global Management.
GuruFocus ranks Alibaba’s profitability 9 out of 10 on several positive investing signs, which include consistent revenue growth, a return on equity that outperforms 93.12% of global competitors and operating margins that are outperforming 93.62% of global peers despite languishing near a 10-year low of 15.32%.
JD.com
At least nine gurus own shares of JD.com, including Andreas Halvorsen (Trades, Portfolio) and Dodge & Cox.
As the second-largest Chinese e-commerce company in terms of transaction volume, JD.com offers a wide selection of authentic products at competitive prices. GuruFocus ranks the Beijing-based company’s financial strength 7 out of 10 on several positive investing signs, which include a strong Altman Z-score of 3.51 and a debt-to-equity ratio that outperforms 71.07% of global competitors.
Vipshop
Seven gurus own shares of Vipshop, including Sarah Ketterer (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
The Guangzhou, Guangdong-based company offers branded products to consumers through flash sales on its Vipshop.com, Vip.com and Lefeng.com platforms. GuruFocus ranks Vipshop’s financial strength and profitability 7 out of 10 on several positive investing signs, which include a strong Altman Z-score of 4.48, debt ratios that outperform over 80% of global competitors and a return on equity that outperforms 82.25% of global peers. Despite this, Vipshop has a weak Piotroski F-score of 3, suggesting poor business operations.
Jumei
Two gurus own shares of Jumei, including GMO leader Jeremy Grantham (Trades, Portfolio).
The Beijing-based company retails beauty products; baby, children and maternity products; light luxury products; and health supplements. According to GuruFocus, Jumei has no long-term debt, suggesting good financial strength. Despite this, Jumei’s profitability ranks a poor 4 out of 10 on the heels of operating losses and declining gross margins over the past five years.
Disclosure: No positions.
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