As stock markets have plummeted this year, the elite fund managers tracked by Fix the Future have been busy snapping up potential bargains in the selloff.
The UK’s FTSE 100 stands alone as the only major stock market in positive territory for 2022, with global stocks down 19% so far this year as fears over climbing inflation have taken their toll.
But while London-listed stocks have been in demand among the world’s top fund managers this year, so too are Chinese shares, as investors bet the worst is over for a market that was hit harder than any other in 2021.
JD.com, China’s largest online retailer, stands head and shoulders above all other shares as the most popular new buy among elite investors.
Twenty of the approximately 500 fund managers in this elite group have established new positions in the stock this year, led by Rebecca Jiang and Howard Wang, who have added the shares to their $6.3bn JPM China and $2.3bn Greater China funds, according to Morningstar. JD.com shares now account for the third- and fifth-largest positions in the funds, while the pair have also added the company to their $1.8bn JPMorgan SAR Greater China fund.
Shares in JD.com fell 20% last year as China’s authorities launched a clampdown on some of its leading technology companies, which spooked investors. Those fears persisted in the early months of this year, but hopes of an easing of the regulatory crackdown have lifted Chinese tech stocks since mid-March. JD.com shares are up 50% since then.
JD.com’s backers see the company as an investment play on the growth of China’s middle class, and the company features in Fix the Future’s emerging prosperity theme.
So too does Baidu, the Chinese internet company which operates one of the largest search engines in the world. Six elite fund managers have built new stakes in the shares in the first half of this year, including Hiren Dasani and Basak Yavuz, managers of the $3.8bn Goldman Sachs Emerging Markets Equity fund, a $4.1bn version of the fund for European investors, and a $45m ESG emerging markets fund.
‘In recent years, the company has expanded its offerings for a more complete user experience,’ the managers said in their latest update to investors. ‘The company has also been increasing its investments in artificial intelligence for new projects such as autonomous driving.
‘We expect better profitability prioritization and new opportunities for the company’s core search feed/ads, market share expansion in their cloud capabilities and increasing traction in its intelligent vehicles business.’
UK shares have also been strongly in demand this year among the fund managers tracked by Fix the Future. The FTSE 100 is the top-performing major global stock market in 2022, escaping the losses suffered elsewhere across the globe largely as a result of its high weighting to the rallying commodities sector.
The two most popular UK buys among elite investors this year, oil giant Shell and miner BHP Group, are both from this sector.
Jon Hudson and Benji Dawes, managers of the Premier Miton UK Growth fund, are among seven to have established new positions in Shell this year, adding the shares in January, according to Morningstar.
The managers have been building their holding as inflationary pressures, coupled with Russia’s invasion of Ukraine, have sent the price of Brent crude more than 50% higher this year.
‘Because we’ve got that ability to flex the exposure towards companies that exhibit more cyclical growth, we have done that, in order to benefit from some of the price moves in commodity markets,’ said Dawes in an update to investors.
Shell, whose shares are up 31% this year, is judged by Fix the Future to be exposed – positively or negatively – to two key themes: energy transition and decarbonisation of transport.
Miner BHP, which is seeking to position itself as a key supplier to the electric car battery market, is also a decarbonisation play, alongside its exposure to two other Fix the Future themes: resource efficiency and recycling and environmental repair.
Level-pegging with BHP and Shell, with seven new buys from top fund managers this year, are index provider S&P Global, biotechnology company Intra-Cellular Therapies and luxury goods business Compagnie Financiere Richemont. They feature in Fix the Future’s fintech, health and longevity and emerging prosperity themes respectively.
Energy is a theme that runs through the list of new buys. Six investors have swooped on the shares of US gas equipment manufacturer and carbon capture specialist Chart Industries in 2022. They include Jon Loth, manager of the Nuveen Small Cap Growth Opportunities fund. ‘The Russia and Ukraine war has highlighted the need for cleaner energy alternatives,’ he said in his latest update to investors.
‘Therefore we bought [fuel cell maker] Bloom Energy and Chart Industries to take advantage of the growth in hydrogen fuel cell development, liquid natural gas distribution and carbon capture technology.’
Shoals Technologies has also attracted some of the world’s best fund managers as new investors this year. Shares in the solar power components maker have lost more than a third of their value in 2022, however, as the selloff in growth stocks has hit the clean energy sector hard.
Meanwhile, six elite fund managers have built new positions in US oilfield services company Baker Hughes this year, as the shares have climbed 18%, buoyed by the rising oil price.
Key facts
Read More: Revealed: 10 shares the world’s top investors are buying in the selloff