China Internet Sector Expanding, Despite Trade Tensions

Warren Buffett often talks of buying good companies at the right price and holding them for many years as investment returns compound. This requires not only patience and conviction but also timing. When consensus on a market is very negative, stocks can be bought low and held for many years to potentially achieve growth. We believe that one such opportunity is occurring right now in the China internet sector.

China internet stocks have traded down nearly 29% year-to-date (YTD) (1) while US internet companies are up over 15% YTD (2). This is the largest price gap these two groups have experienced since 20103. Every day we read about trade tensions and China’s slowing GDP growth, but what has been overshadowed is the continued growth of China’s services sector, retail sales, and the expanding universe of publicly traded Chinese internet companies. We believe this is a great example of noise and sentiment creating investment opportunities