Why Cooper Investors’ stock picker Qiao Ma is betting on consumers

High-profile stock picker Qiao Ma is planning to tip a Hong Kong-based consumer brand player when she fronts the annual Sohn Hearts & Minds conference next month.

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Ma, a portfolio manager for the Asian Equities Fund at Cooper Investors, is not yet revealing the name of the company, but she says it is a globally recognised consumer brand.

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In her first appearance at the conference last year, Ma picked the world’s largest sportswear maker, Hong Kong-listed and China-based Shenzhou International, which makes clothing for Nike, Adidas, Uniqlo and Puma.

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That company’s stock has notched double-digit gains over the year, despite being hit by supply chain issues as a result of Covid, including congestion at the port of Los Angeles and factory shutdowns in Asia.

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“The company we are thinking about pitching this time is domiciled in Hong Kong but is a fantastic global company,” Ma said in an interview with The Australian.

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“It’s a global consumer demand company supplying some best-in-class products. It owns its own brand and its own production processes.”

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Ma, who was born in Beijing and grew up in southern China, speaking both Mandarin and Cantonese, before studying at the University of Virginia and doing an MBA at Harvard, is a big fan of Hong Kong and selected China stocks. She says the recent controversy about announcements by the Chinese government penalising companies such as Alibaba and Tencent and cracking down on online gaming and educational stocks has created buying opportunities. The Asian Equities Fund has just over 40 per cent of its assets in companies from Hong Kong and China.

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“The fund has been investing in China since before the global ­financial crisis,” she says.

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“Every few years there is a loud bang and a scream in the investor community which says China is no longer investable. When we hear that, we like it.

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“This is probably the cheapest I have seen Tencent in a decade.”

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She runs a high conviction fund that has 30 Asian stocks in its portfolio, including about a dozen from China.

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Ma says there has been a “massive leap forward” in the management quality of many private sector Chinese companies.

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“There are management teams which have their motivation incentives very well aligned with investors,” she says.

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“They have very high standards of integrity and very high levels of capability.

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“We’ve seen them navigate the trade war with [former US president Donald] Trump, and then Covid-19 and a lot of these regulatory issues – some of which is impactful and some of which is noise. There are some management teams doing a really good job steering the ship.”

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Ma says the fund does not “invest in China” per se, but picks specific stocks in the country, particularly in the areas of IT and consumer brands, in what it believes are good companies with good management.

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“We are not ‘investing in China.’ We are investing in very specific businesses led by really great people,” Ma says.

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She says Cooper’s Asian fund holds shares in the Hong Kong Stock Exchange, which it believes will become an increasingly important place for companies from mainland China to list as they ­become more wary of US stockmarkets.

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“Hong Kong will remain a very dynamic place,” she says. “We think with all the volatility and uncertainty, Hong Kong will become the place of preference for Chinese companies to list.

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“China is the second-largest economy in the world. Half of the Fortune 500 companies come from China every year. These companies don’t have a great ­option to list elsewhere.

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“As a financial market, the ­importance of Hong Kong is not diminished. For some companies it is the only way they can access international capital.”

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Ma points out that the Hong Kong market is now particularly attractive as investors from mainland China can invest directly into shares listed on the Hong Kong Stock Exchange through the “stock connect” system, set up a few years ago between Hong Kong and China.

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Ma says the performance of her Sohn stock tip last year, Shenzhou International, is proof of her argument about the high-quality management of some companies in mainland China these days.

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She says the company is keeping its investors up to date with details of the port congestion in Los Angeles, a key shipment area for its goods. “It was not their fault but its chairman, Ma Jianrong, came out and apologised that the company was having a bit of a hiccup,” Ma says.

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She says the company provides a detailed breakdown of how many weeks it expects port issues to go on for and how it will affect the company.

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“When factories in Vietnam and Cambodia were temporarily closed because of Covid, we got almost a weekly update on when they would be coming back online,” Ma says.

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Ma, who worked on Wall Street as a fund manager before moving to Melbourne after marrying an Australian, has been a long-time fan of the Sohn Hearts & Minds conference.

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The conference started in New York in 1995 to commemorate the life of Ira Sohn, a Wall Street fund manager who died at the age of 29 from cancer.

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A group of his fund manager friends decided to get together and sell tickets to a conference where they all tipped their favourite stock, to raise money for children’s cancer research.

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The idea of the conference has spread around the world, with top fund managers tipping stocks to raise money for medical research.

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This year’s conference in Australia, its second online as a result of Covid, will feature a video appearance by Warren Buffett’s colleague, Charlie Munger.

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The Australian conferences have raised more than $30m for medical research since they started in 2016.

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“I was a big fan of the Sohn conferences in New York,” Ma says. “They were at the Lincoln Centre. I used to go every year. I have been to a few in Hong Kong but the conference in Australia is my personal favourite.”

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Ma’s career on Wall Street included working for Lehman Brothers from 2006 to 2008. She was there when it collapsed in the wake of the global financial crisis.

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She says the experience gave her first-hand insight of the dangers of hubris in company management. “We all, including myself, thought we were going to sail through unscathed,” she says.

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She says Cooper Investors has a “bottom-up” approach to investing, which is looking for management teams that don’t have hubris and have a strong sense of “humility”.

She says this is a key criteria in assessing companies.

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“When we are looking at stocks in Asia we don’t think about the risks of the whole region,” she says.

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“We don’t think all companies are positioned the same. Some companies are positioned much better than others in their industry. We make it our mission to find those companies.”

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This article was originally posted by The Australian here.

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