Bought some recently. Int discussion between Magellan and PTM. They both agree chinese stocks are where its at.

It’s growth versus value as Andrew Clifford, Hamish Douglass square off

It was value versus growth as Australia’s best-known global fund managers squared off.Despite going head-to-head the Livewire conference in Sydney, Platinum’s Andrew Clifford and Magellan’s Hamish Douglass did find some common ground despite vastly different investing styles.While global financial markets obsess about the US-China trade war and the potential for further interest rate cuts by the central banks, both Platinum and Magellan agree that the rise of the Chinese consumer will be by far the most important force for next decade or two. Of course, one could be forgiven for thinking the US empire isn’t dead after all and perhaps this isn’t the much heralded “Asian Century”.
Indeed a 50 per cent rise in the S&P 500 and a 76 per cent rise in the Nasdaq in the past five years may point to an “American reboot”.
Much to the frustration of Platinum’s Mr Clifford, who has stuck with Chinese-listed shares, the Shanghai Composite index has gone nowhere in the same period, despite the urbanisation of China and its vastly superior — but slowing — economic growth profile relative to the US.But he has no doubt that China’s sharemarket offers the biggest upside over the long term and it’s all about the consumer.“I think the underlying story of Asia’s growing dominance is very real,” said Mr Clifford, who oversees a $24.4bn China-focused fund.“This is Asian Century and the US — their entire behaviour around trade is a clear sign of their decline,” he said.
“The issue is in the stockmarket there are a whole lot of other variables and I think it’s a great lesson for today.”Mr Douglass has done famously well from steering the $92bn Magellan Global Fund into strongly performing companies exposed to the Chinese consumer — rather than companies listed in China — but he’s on the same page as Mr Clifford about the rise of China.“I do believe in the next 20 years it’s the Chinese sort-of 20 years ahead — there a very powerful structural issues going on.”“But what’s going to be very important for the next years — and you can do it by Chinese companies, European companies or US companies — but what you have to be careful of is … something I would call ‘capitalism without capital’.”Mr Clifford said the fact that Chinese stocks had de-rated from “insanely expensive” in mid-2016 wasn’t a surprise. But that they’ve de-rated to the point that they now trade on a fraction of the multiples being paid for companies with similar growth rates in the US is “quite extraordinary”.
For Magellan’s Mr Douglass the Chinese-exposed businesses that are “winning” are typically Nasdaq-listed and “capital-light”, while many Chinese-listed peers that trade on low price-to-earnings multiples — including banks, property, industrial, manufacturing businesses — are “capital-intensive”.He expects underperformance from the Australian sharemarket — particularly banks — for the same reason.Platinum’s Mr Clifford takes issue with Magellan’s “capital-intensive versus capital-light” argument, labelling it a “misnomer”.
Among his favourites are Chinese consumer plays, like Ping An Insurance — China’s leading life insurer and No 2 general insurer — one of the world’s leading fintech companies with its peer-to-peer lending platform.“This is one of the most extraordinary companies, growing at 20 per cent per annum for 20 years — that’s a complete rarity and it’s trading on just nine times earnings. It’s a life insurance business so it certainly has capital requirements, but we are talking ROEs (return on equity) in the mid-20s. If that was a US stock it would be on 30 times.“Then we have two better-known names that make the list of top 10. We have Alibaba. It is the Amazon of China, but it’s far more than that.“It is one of the biggest payments companies in the world and it has strong positions in everything associated with e-commerce — video streaming, food delivery, uber — and the thing is on 25 times. It’s making money, unlike Amazon, and it is growing like crazy.”Another favourite for Mr Clifford is Tencent, the biggest payments company in the world that’s been called the “Facebook of China”.“
Tencent is the leading gaming developer, producer and platform in China,” he said. “They lead payments and food delivery, video streaming, it’s all of these things. This one’s a little more expensive, but a return on equity in the 20s and you have to pay 30 times (EPS).”Both Alibaba and Tencent are well below April peaks.
It’s no surprise Magellan’s Douglass also favours the Nasdaq-listed Alibaba.