As the weekend arrives, trading in the A-shares often takes a backseat, offering a rare peaceful respite for investors. This past week was particularly eventful in the market sphere, notably marked by Nvidia's financial report, a leader in the AI chip sector. In the wake of this, many renowned investors in China expressed support for Nvidia, among them Dan Bin of Dongfang Harbor. In this article, we will delve into Dan Bin's successful investment strategies and philosophies, enriching your weekend reflection with insights and a bonus reveal at the end about a company catching Dan Bin's interest lately.
Dan Bin and his firm, Dongfang Harbor, have always adhered to a philosophy centered on growing alongside great companies. His perspective on these companies is intriguing, categorized into two main types: those that remain unchangeable by the world and those capable of changing the world. A prime example of the former in the A-share market is the celebrated liquor brand Moutai, symbolizing stability and enduring value.
In Dan Bin's eyes, transformative companies are predominantly the giants of the American stock market riding the tide of AI, with Nvidia being a standout. He firmly believes that the advancements in AI will act as a catalyst for the Fourth Industrial Revolution, increasing the likelihood of success when investing in such transformative firms. Dan Bin further emphasizes that this era favors the 'whales' of the industry rather than smaller players. Following suit, one of the fund managers at Dongfang Harbor, Ren Renxiong, has taken an 'All in AI' stance as of 2023.
Dan Bin's admiration for Nvidia is palpable. He does not shy away from lauding the company's headquarters as the most aesthetically pleasing he has ever encountered. Over the past decade, he notes, chip performance has surged by an astonishing millionfold. He projects that the next ten years will likely see similar growth, which underscores the potential of an industry still far from hitting its ceiling. When asked about Nvidia's earnings performance during the first quarter, Dan Bin confidently remarked, "Likely exceeding expectations," and indeed, Nvidia recorded revenues of $26 billion, surpassing market predictions of $24.65 billion.
Back in late February, when Nvidia's closing price hovered near $800, Dan Bin held high aspirations for the company's overall market cap, asserting it could reach $10 trillion. He envisioned Nvidia's stock price eventually hitting $4,000, signifying over a fourfold increase from its then-current valuation. Fast-forward to today, and amidst stronger-than-expected performance, Nvidia's stock has crossed the remarkable $1,000 threshold.
For ordinary investors, directly investing in AI giants like Nvidia may seem daunting. Is there still a chance to 'copy homework' in this scenario? The answer is a resounding yes. Dan Bin's funds have heavily invested in multiple relevant ETF funds, which provide an accessible entry point for average investors looking to tap into the AI sector without the burdensome barriers typically associated with individual stock purchases.
Our statistics reveal that by the end of last year, Dan Bin had significant holdings in eight different ETF funds, where the top ten stocks predominantly included market leaders such as Microsoft, Apple, Nvidia, Amazon, and Facebook. Notably, many of these investments were either new additions or increased stakes, suggesting they align with Dan Bin's notion of 'whales' in the investment ocean. Some of the specific funds include Bo Shi Nasdaq 100 ETF, among others.
Moreover, the Galaxy Dongfang Harbor 1 and 2 funds, under the advisory of Dongfang Harbor, have also emphasized ETF holdings in this year's first quarter, with the 1 fund investing in three ETFs and the 2 fund in five. The top stocks in these ETFs reflect Dan Bin's commitment to the 'whales' philosophy, focusing on stability and growth within the AI-related sectors.
The managers of Galaxy Dongfang Harbor 1 and 2 share a commendable view on AI, noting in their investment strategy reviews and outlooks that "AI, as a 'general-purpose technology', will fundamentally change society, the economy, and our lives. Rome wasn't built in a day... While we may currently see rubble and rubble piles, the palaces of tomorrow are merely a matter of time, and we believe that 'time' will not be excessively prolonged. However, patience and steadfastness are necessary in investing."
But what about the opportunities within the A-share AI supply chain? The answer remains optimistic. Despite an ongoing sentiment that China's A-share AI firms carry inflated valuations, Dan Bin's investment team has not shied away from targeting these firms. By the end of the first quarter of 2023, related products from Dongfang Harbor make a rare appearance among the top ten circulating shareholders of AI-related public companies such as Huagong Technology, COSCO Shipping Technology, and Guomai Culture.
Some pundits suggest that the culmination of AI is energy. However, Dan Bin is equally convinced that energy sectors will benefit profoundly from AI advancements. Therefore, in his portfolio beyond the 'All in AI' strategy, Dan Bin also banks on resources like coal.
In his investment philosophy, Dan Bin likens his approach to nurturing roses, as presented in his book "The Roses of Time." The idea posits that quality companies appreciate over time, akin to how roses bloom under the nurturing of time—a sentiment that encapsulates the core tenets of value investing. His steadfast belief in Moutai encapsulates this philosophy beautifully.
Within his publication "The Roses of Time," Dan Bin highlights other metaphorical roses such as Vanke, Ping An of China, and Haitian Flavor Industry, each symbolizing high-quality investments across different periods. Presently, coal stocks represent another cherished rose in Dan Bin's investment garden.
In Dan Bin's view, the burgeoning demand for computing power driven by AI will inevitably cause a surge in societal demand for electricity. He has repeatedly underscored his holdings in coal and other resource stocks. In March this year, he noted, "Certain coal shares have outperformed giants like Microsoft, Apple, TSMC, Amazon, and Google, trailing only behind Nvidia and META, proving that there's room for value investment in the A-shares!"
Moreover, these coal stocks are characterized by high dividend yields, which further supports their attractiveness. Dan Bin exclaims, "The key in A-shares is that they are too expensive; if every stock could emulate the dividend yields of coal stocks around 10%, there wouldn’t be a significant chance for them to fall, as dividends would ensure a solid return in seven years.”
In terms of stock holdings from the first quarter of this year, both Galaxy Dongfang Harbor 1 and 2 funds are heavily invested in high dividend coal companies. Notably, the 1 fund holds significant stakes in Shaanxi Coal and Electricity, Moutai, and Yancoal Australia (H), while the 2 fund maintains substantial holdings in Moutai, Yancoal Australia (H), and China National Offshore Oil Corporation (H).
Beyond these considerations, Dongfang Harbor has engaged in multiple company consultations this year, with a sharpened focus on AI and stocks boasting high dividend yields. They have shown interest in firms such as Thomas Cat, exemplifying their ongoing strategy to align investment with industry trends.