In this article, we discuss the top 10 stock picks of Charles Huang’s IvyRock Asset Management. If you want to skip our detailed analysis of these stocks, go directly to IvyRock Asset Management: Charles Huang’s Top 5 Stock Picks.
Charles Yong Huang is the founder of IvyRock Asset Management, which is a Hong Kong-based investment management firm founded in 2012. IvyRock Asset Management manages Greater China public equity investments, investing in Chinese stocks listed as onshore A-shares, as well as Hong Kong and US ADRs markets. The firm manages both long/short and long only equity strategies, with clients including global, institutional, and private investors.
At IvyRock Asset Management, Huang manages a portfolio worth over $105.5 million, as well as assets under management valued at more than $1 billion, according to the 13F filings at the end of June. Huang’s investment portfolio is concentrated in the finance, information technology, industrials, consumer discretionary, and communications sectors. The largest holding in IvyRock Asset Management’s Q2 portfolio is JD.com, Inc. (NASDAQ:JD), which represents 23.17% of the firm’s stock portfolio.
The most notable stocks in Huang’s Q2 portfolio are Sea Limited (NYSE:SE), Upwork Inc. (NASDAQ:UPWK), JD.com, Inc. (NASDAQ:JD), and Futu Holdings Limited (NASDAQ:FUTU), among others discussed in detail below.
With this context in mind, let’s take a look at IvyRock Asset Management’s top 10 stock picks. We used IvyRock Asset Management’s Q2 portfolio to compile this list, ranking the stocks according to the value of each holding in the firm’s portfolio as of June this year.
Why should we pay attention to Charles Huang’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
IvyRock Asset Management: Charles Huang’s Top Stock Picks
10. Compass, Inc. (NYSE:COMP)
IvyRock Asset Management’s Stake Value: $477,000
Percentage of IvyRock Asset Management’s 13F Portfolio: 0.45%
Number of Hedge Fund Holders: 23
Compass, Inc. (NYSE:COMP), a top stock pick of Charles Huang, is a real estate broker from New York, which uses the internet to leverage property technology to help with real estate operations. Compass, Inc. (NYSE:COMP) caters to upscale markets, where it sells luxury homes at high margins. One of Compass, Inc. (NYSE:COMP)’s products is a real estate app which facilitates property advisors and real estate agents with an uncomplicated property software.
IvyRock Asset Management, as of June this year, owns 36,000 shares in Compass, Inc. (NYSE:COMP), worth $477,000, representing 0.45% of the firm’s investment portfolio.
As of the second quarter of 2021, 23 hedge funds monitored by Insider Monkey reported owning stakes in Compass, Inc. (NYSE:COMP), with a stake value of $708.4 million.
In addition to Sea Limited (NYSE:SE), Upwork Inc. (NASDAQ:UPWK), JD.com, Inc. (NASDAQ:JD), and Futu Holdings Limited (NASDAQ:FUTU), Compass, Inc. (NYSE:COMP) is a notable stock in Charles Huang’s Q2 portfolio.
“We established five new positions during the quarter across four sectors, supporting our approach of seeking to participate in a broad range of growth opportunities among mid cap companies. We also participated in the IPO of Compass, a real estate technology company disrupting the residential brokerage industry by improving agent efficiency, leading to rapid market share gains.”
9. Hywin Holdings Ltd. (NASDAQ:HYW)
IvyRock Asset Management’s Stake Value: $1,222,000
Percentage of IvyRock Asset Management’s 13F Portfolio: 1.15%
Number of Hedge Fund Holders: 1
Hywin Holdings Ltd. (NASDAQ:HYW) is a Chinese wealth management company, offering asset allocation advisory services, asset management, wealth management, and related financial products to a wealthy and upscale clientele. The largest business segment at Hywin Holdings Ltd. (NASDAQ:HYW) is wealth management, with the firm offering its services to customers across generations.
Hywin Holdings Ltd. (NASDAQ:HYW) is a top stock pick of Charles Huang, who owns 200,000 shares in the company as of June this year, via IvyRock Asset Management, with total stake value of approximately $1.22 million, which represents 1.15% of the firm’s Q2 portfolio.
8. Vipshop Holdings Limited (NYSE:VIPS)
IvyRock Asset Management’s Stake Value: $3,676,000
Percentage of IvyRock Asset Management’s 13F Portfolio: 3.48%
Number of Hedge Fund Holders: 36
Vipshop Holdings Limited (NYSE:VIPS) is a Chinese ecommerce company, operating a website called VIP.com, which offers online discount sales. Vipshop Holdings Limited (NYSE:VIPS) is one of the top B2C ecommerce retailers in China, being the third largest ecommerce platform, after Tmall and JD.com, Inc. (NASDAQ:JD).
Vipshop Holdings Limited (NYSE:VIPS) is one of the top stocks in Charles Huang’s IvyRock Asset Management’s Q2 portfolio, with the investment firm owning 330,000 shares in Vipshop Holdings Limited (NYSE:VIPS), worth $3.67 million, representing 3.48% of the firm’s stock portfolio.
As of the second quarter of 2021, 36 hedge funds tracked by Insider Monkey’s database of elite funds were long Vipshop Holdings Limited (NYSE:VIPS), down from 54 in the preceding quarter.
Here is what Oakmark Fund has to say about Vipshop Holdings Limited (NYSE:VIPS) in its Q3 2021 investor letter:
“Vipshop Holdings ADR (China) offers a differentiated value proposition to its customers via its online product sales and distributions services. We like that the business model is asset-light due to inventory being predominantly on consignment and logistics outsourced to a third party. We believe the company should generate meaningful free cash flow moving forward.”
7. Sea Limited (NYSE:SE)
IvyRock Asset Management’s Stake Value: $5,434,000
Percentage of IvyRock Asset Management’s 13F Portfolio: 5.14%
Number of Hedge Fund Holders: 104
Sea Limited (NYSE:SE) is a top stock pick of Charles Huang’s IvyRock Asset Management, with the investment firm owning 17,050 shares in Sea Limited (NYSE:SE), worth $5.43 million, representing 5.14% of the firm’s portfolio as of June this year. Sea Limited (NYSE:SE) is a Singapore-based internet company that offers digital entertainment via Garena, which is an online video game developer, ecommerce via Shopee, an online retail platform, and financial services via SeaMoney, which is a digital wallet offering payment processing, credit, and relevant financial services.
Jiong Shao is a Barclays analyst who, on November 2, kept an Overweight rating on Sea Limited (NYSE:SE), with a $427 price target. Shao stated that the Chinese technology sector is thriving, and is fully supported by the Chinese government. As the second largest economy in the world, investments in Chinese companies cannot be foregone. In addition to that, Sea Limited (NYSE:SE) is the top ecommerce platform and online game developer in the Southeast Asian region.
As of the end of June, 104 hedge funds out of the 873 funds tracked by Insider Monkey were bullish on Sea Limited (NYSE:SE), up from 98 in the preceding quarter.
Here is what Tao Value has to say about Sea Limited (NYSE:SE) in its Q2 2021 investor letter:
“Sea continued to execute above expectation. The gaming business continued strong momentum, recording bookings of $1.1 billion, growing 117% y-o-y. The major franchise Free Fire showed no sign of slowing down in the established ASEAN & LatAm market and received positive reception from new markets like the US. On the ecommerce side, Shopee demonstrated early success in expanding to Brazil, by adopting a low-price category & gamification strategy. For 2021, Shopee is now the top downloaded ecommerce app in Brazil, almost 2x of the second-place local leader Mercado Libre (MELI). I also see the most promising development is in its FinTech business – SeaMoney, which more than doubled its revenue in Q1 2021 from the previous quarter! With online lending products rolling out, SeaMoney is poised to grow rapidly, becoming the 3rd growth curve for Sea.”
6. UP Fintech Holding Limited (NASDAQ:TIGR)
IvyRock Asset Management’s Stake Value: $5,486,000
Percentage of IvyRock Asset Management’s 13F Portfolio: 5.19%
Number of Hedge Fund Holders: 16
UP Fintech Holding Limited (NASDAQ:TIGR), one of the top stock picks of Charles Huang as of June this year, is an online brokerage firm which caters to global Chinese investors. UP Fintech Holding Limited (NASDAQ:TIGR) offers investors a platform where they can trade in securities from several exchanges worldwide. In addition to that, UP Fintech Holding Limited (NASDAQ:TIGR) offers customers services like trade execution, margin financing, managing accounts, investor education, community discourse, and customer support.
IvyRock Asset Management owns 518,000 shares in UP Fintech Holding Limited (NASDAQ:TIGR), valued at $5.48 million, representing 5.19% of the firm’s portfolio as of June this year.
Out of the 873 hedge funds monitored by Insider Monkey’s database of elite funds, 16 funds were long UP Fintech Holding Limited (NASDAQ:TIGR) as of June, up from 14 in the preceding quarter.
“We are long shares of UP Fintech (“TIGR”), the holding company of Tiger Brokers. TIGR’s shares have retreated dramatically since early July with the recent escalation of regulatory pressure and fears brought on by DIDI’s IPO. Since the end of June, TIGR’s shares have fallen -44% and have dramatically underperformed the KWEB ETF (-26%) and its direct peer FUTU (-41%). In our view, this has left TIGR’s shares significantly undervalued (23x P/E on 2022 street numbers versus peer group average 35x) ahead of what should be strong operational results and a materially positive catalyst in the company receiving a Hong Kong securities license.
We believe Tiger has a long runway for continued growth. Though China is famous for its high savings rate, households have tended to invest in real estate and bank deposits, with equities accounting for a much smaller fraction of total wealth than in Western developed markets. But as more Chinese investors, especially young ones, become familiar with global capital markets, portfolios are shifting, freeing up a gargantuan addressable market. Already, Chinese household wealth totals $78 trillion, and we estimate that in 10 years it will exceed $200 trillion – almost twice the current US level. There will be room for multiple online brokerages worth tens of billions of dollars, and we believe Tiger – currently valued at $2.7 billion – will be one of them.
Though the business model remains fairly simple – revenue is dominated by commissions (65% of the total in the latest reported quarter) and net interest income, primarily derived from margin loans (20%), with expenses dominated by the cost of software engineers – Tiger has begun to expand into adjacent business lines, including IPO underwriting (helping its customers gain early access to newly US-listed Chinese companies) and the management of employee stock ownership plans (serving many of those same companies). To be sure, Tiger has competition, primarily from Futu, another up-and-coming China-focused low-cost online broker. But with such a large and rapidly growing addressable market, competition hasn’t stopped Tiger from consistently winning new business.
The temporary pullback in Chinese ADR IPOs is a manageable issue – other revenue, which is primarily revenue from US ADR and Hong Kong IPO underwriting, accounted for 16% of revenue in 2020, while consensus has other revenue falling to 11% of total revenue in 2021 and 8% of revenue in 2022. Even if there were no more US listings of Chinese companies, an unlikely scenario in our view, the financial impact on TIGR’s overall business would be manageable. We believe a number of these IPOs would still occur, just on the Hong Kong stock exchange instead of US exchanges. The economics of each deal would be lower for TIGR, but much better than a complete loss of revenue. We also note that the company’s FX exchange business, the smaller component of other revenue, should continue to grow due to the company’s expanding user base. Based on our analysis, even in a draconian scenario where there are no more ADR IPOs, we believe the direct hit to TIGR’s 2021/2022 revenue would only be a low- to mid-single digit percentage impact.
The issuance of a Hong Kong license is on the horizon – TIGR applied for an HK securities license in February of 2021 and remains confident that they will be granted this license before the end of the year. Being granted an HK securities license would have several positive benefits for the company’s operational and financial performance, including the ability to market to Hong Kong citizens directly and drive incremental net adds. Hong Kong is a large and lucrative brokerage market, and TIGR’s management is confident that it can be a material driver of net adds for the company. Further, TIGR’s monetization and profitability from HK securities trading and margin lending, which is currently done through a partnership with IBKR, would substantially improve. TIGR will also receive a higher allocation (and profitability) on HK IPO subscriptions.
TIGR continues to expand internationally outside of China at a rapid rate. TIGR began to expand its….[Read rest of the letter here]
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Disclosure: None. IvyRock Asset Management: Charles Huang’s Top 10 Stock Picks is originally published by Insider Monkey.