Expert Stock Pickers: Simon Edelsten is Investing in China

Simon Edelsten has a long history in investment management, and his fund, Artemis Global Select, has 60% returns over the past 3 years that prove his mettle. Other funds focused on the same sector returned an average 44% during that same time.

Edelsten is something of an outlier in the investment manager community, because he’s brazenly bullish on China. In fact, 10% of Artemis Global Select’s money is in Chinese companies. Investors around the world are wary of China. They see the nation’s devaluation of its own currency, and dramatic increases in consumer debt load, as negative influences on its economic future.

But Edelsten isn’t invested in just any Chinese companies. He’s honed in on a few that thrive under the present market conditions. No matter what is going on in the Chinese battle against the US Dollar, or currency threats to Chinese exports, Edelsten continues to find value in this massive developing economy.

What Chinese Companies Does Artemis Global Select Hold?

As already stated, 10% of Edelsten’s fund is in Chinese companies. Among these are The Agricultural Bank of China ($ABC), China Life Insurance ($LFC), and Tencent Holdings. We’ll take a look at why Edelsten sees values in these companies.

  • The Agricultural Bank of China ($ABC). Many of the Chinese companies trying to create stakes in international companies are having to fight their own government to do so. Not so with the Agricultural Bank of China, whose focus is entirely domestic. Last quarter, ABC lending increased 10%, but deposits increased by 12%. The bank keeps beating analyst revenue expectations (by 3.8% in 2016, or $26.7 Billion in profits over their total profits in 2015). In a nation focused on consolidating wealth domestically, the place where people keep their money will necessarily show excellent growth. Edelsten believes ABC is that company (or at least one of them).
  • China Life Insurance ($LFC). There are many societal reasons why life insurance is a booming industry in China. As the country develops and life expectancy increases across the board, saving for old age and poor health will increase, as will insurance needs. Additionally, personal wealth is exploding in many parts of China. As people become richer, they have greater need to insure themselves and their possessions.
  • Tencent Holdings. Tencent Holdings is an enormous Chinese investment company that just bought a 5% stake in Tesla (at a $40/share discount, I might add). Tencent is a staple in many international funds. Tencent is deeply invested in China, with their hands in national media, various entertainment forms, mobile and internet services, payment networks, and online advertising.

Should You Buy Artemis Global Select or the Chinese Companies It’s Invested in?

That would not be a bad idea. Of all the available options, Investing in Artemis directly may provide the best results if recent history is any guide. For people willing to do the grunt work of digging deep into these companies (not always an easy task for people living outside of China), you may be able to uncover even greater return potential.

If you’re invested in international funds already (like Vanguard’s VGTSX, for example), you’ll already be getting a lot of Tencent. Similarly, if you want Tesla, buying Tencent will get you what you’re looking for, while giving you a lot of China-heavy diversification in the bundle.

As American stocks rise to new heights week after week, I’m interested in international growth markets. I think Edelsten’s bet on China is a good one, and it’s one I’ve mirrored in a portion of my own portfolio.

What do you think?

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