Baidu and Alibaba
Hedge funds manager Dan Niles does not currently have any Chinese technology stockpiles – but the latest price drop from China made him “a bit intrigued” to purchase it again.
“I have to admit, with some of the lower moves today, I was a little tempted,” Niles, founder and portfolio manager at Satori Fund, said: “I want to see where the floor is, and we don’t know where it ends right now.”
Chinese tech stocks listed in Hong Kong and the United States fell this week after Chinese regulators launched an investigation into Didi, a ride-hailing app that went public in the United States just days before. Authorities also stated that they would increase oversight on Chinese listings in the United States, resulting in a large sell-off.
When it comes time to go “bottom fishing,” Niles said he’ll look at two of his favorite Chinese tech stocks: Chinese search giant Baidu and e-commerce behemoth Alibaba.
Baidu’s stock in the United States has fallen 18.66 percent year to date, while Jack Ma’s Alibaba has fallen 14.13 percent. Niles, for one, stated that his fund is “not currently invested in Chinese technology companies.”
“Baidu was one we liked after the Archegos meltdown,” Niles said, referring to Archegos Capital Management’s forced liquidation of positions in late March, which resulted in severe selling pressure on Chinese internet names like Baidu and Tencent.
“They are in a lot of great areas, such as electric vehicles, and they are obviously in search,” he explained, citing Baidu as one of his favorite stocks.
The hedge fund manager also likes Alibaba, though its numbers “probably need to come down a little bit.”
“All of these companies are investing very aggressively for growth, and as a result, the margins for a good number of them probably need to move lower,” he added.
Nonetheless, Niles stated that his opinion was formed on a technical level, “where you go wow the stocks are down a ton on super high volume, everybody’s getting rid of these things, and maybe I’ve discounted some of the risk.”
“The problem is — you thought that twice before and you were wrong both times,” Niles said, referring to the Archegos debacle in April and the November tech sell-off after Ant Group’s much-anticipated IPO in Shanghai and Hong Kong was abruptly halted due to regulatory concerns.
Chinese regulators have tightened their grip on the country’s tech titans in the last year, enacting a slew of regulations covering areas such as antitrust and data protection.
“You really need the regulatory environment to relax so that these companies can trade on fundamentals rather than Chinese headlines,” Niles said. “Right now, valuations and stock prices are related to what we’re seeing with the government putting pressure on it.”
“At some point, we will try to buy some of them because, at the end of the day, China still has a lot more people who can come online,” he said.
According to him, internet penetration in China is currently between 65 and 70 percent. “There’s no reason why that shouldn’t be in the 90s over time, as it is in most developed countries.”
US best stocks
A number of factors are playing into the negative sentiment rippling through the stock market, analysts said earlier in the day, citing among them concern over the coronavirus pandemic, especially the highly contagious delta variant, and slowing economic growth. “It’s not a horrible time, but it’s obviously a time where people are reassessing,” the “Mad Money” host said earlier.While skeptical that economies are really decelerating, analysts said that appears to be a belief on Wall Street. Against that backdrop, he said investors who are worried about moderating growth can look to PepsiCo.
“At this point, if we’re really slowing down … then you buy consumer package goods companies that actually have earnings and organic growth north of 5% That is the definition, the definition, of PepsiCo,” analysts said.
Shares of Pepsi, which are up about 1% year to date, were basically flat Thursday.
Given worries about delta, which has become the dominant Covid variant in the U.S., analysts said, “What would you think about buying Pfizer? You get the delta; that means the numbers aren’t going to fall in 2022,” referring to vaccine sales, he added.
Health officials are urging people to get vaccinated, citing delta and other variants as a key form of protection to help rein in the pandemic across the world.
″[Next year] will not be as bad as we think. It has a 4% yield, but it has to make an acquisition because of the giant patent cliff, but they’re smart guys at Pfizer,” analysts said.
Pfizer shares were lower by around 0.8% Thursday. The stock is up just roughly 7% year to date.
Bitcoin may collapse
Minerd told Brian Sullivan that bitcoin’s trajectory appeared to be worse than a typical correction in the volatile crypto space, and that it could fall back to where it traded last summer before its parabolic rise.
“A typical correction or sell-off would range from 40% to 50%. But when we look at the history of cryptocurrency and where we are now, I believe this is most likely a crash,” Minerd said. “And a crash would mean we’d be down 70% to 80%, which would be, let’s say, between $10,000 and $15,000.”
In April, Minerd predicted that the price of bitcoin would soon be cut in half. When Minerd made his call, bitcoin was trading near $55,000, having fallen from its all-time high of more than $60,000. In June, it fell below $30,000 for the first time.
Although the cryptocurrency has since recovered from its lows, Minerd believes the overall trend still points to further declines. It was trading around $32,800 on Friday.
“There is a lot of trading going on in the market. It’s extremely difficult to get this thing to reverse. I wouldn’t rush to purchase bitcoin, and I don’t see any reason to do so right now. If you’re going to speculate, speculate that it will fall,” he said.
Long term, the Guggenheim global chief investment officer is not a complete crypto skeptic, having previously stated that bitcoin could eventually reach $400,000 per coin.
