Cathie Wood: Here's Why I Had To Sell Out Of China

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In this video, I cover why Cathie Wood just sold out of all

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Over the past few weeks, Cathie Wood, the CEO, and CIO of Ark invest has exited out of almost all of her Chinese holdings. She recently sold over $300 million of JD, $40 million of Kanzhun, $110 million of Pinduoduo, $48 million of BYD Auto, $165 million of Baidu, and over $650 million of Tencent (Show the graphs of each one as I say it use the moving back and forth animation.
This move essentially reversed Ark’s decision to purchase Chinese stocks earlier this year in February. On the contrary, many value investors are taking advantage of the buying opportunity. Warren Buffett’s right-hand man, Charlie Munger, Ray Dalio, the CIO of the largest hedge fund, and Mohnish Pabrai, all believe that Chinese stocks are at a major discount right now.
Ultimately, this leaves one question for us investors, “Which side should we be on?”
This video will go in-depth on both sides of the debate and come to a conclusion on the heated clash in Chinese stocks. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
In Ark Invest’s July market webinar, Cathie Wood explained how we’ve already seen a valuation reset in Chinese stocks due to a few reasons. The essence of capitalism is that through a desire to generate wealth, productivity and innovation are created. With China’s new regulations on successful companies like DiDi, Ant, and Tencent, Cathie believes that the incentive for success has diminished in China. And because of this, Cathie thinks that less innovation and advancement will occur over the long term.
In addition to lowered incentives, many believed that Biden would be more lenient on China than Trump, but we’ve seen Biden Administration continue to be harsh on China. In fact, most recently, a Chinese state-run media outlet accused Biden of threatening war. The result of the rising tensions between the US and China is the possibility for strict business restrictions for foreign companies. For example, Alibaba is rapidly expanding its AliExpress marketplace into Europe. However, if there are some security concerns, then this expansion may not occur as expected. Cathie sees this possibility as a major detriment to future growth.
The last reason for Ark selling out of China is because of short-term valuation concerns. Cathie Wood often focuses on long-term movements, but she also looks at short-term trends and actively trades them. In terms of Chinese stocks, Cathie believes that valuations will remain low for a while because there are no short-term regulatory catalysts. Therefore, it is possible that we see Cathie Wood and Ark Invest buy back into Chinese stocks in the future.
Cathie Wood is currently betting on a short-term trend that stay-at-home services will remain stronger than expected. As a result, it is possible that she would rather allocate capital to this bet instead of investing in Chinese assets that will likely remain low for the short term. On the other side of the debate, many value investors believe that the Chinese capital markets are currently very attractive. Most investors regard Warren Buffett as the greatest investor of all time, and rightfully so, as he has an incredible long-term track record. However, behind Berkshire Hathaway, there are many investors that helped Berkshire become what it is today. Two of those people are Li Lu, the Buffett of China, and Charlie Munger, the right-hand man of Buffett. Both of these successful investors believe that Chinese assets are incredibly undervalued right now. Li Lu is a successful fund manager who according to several sources, has averaged a return of 20% per year since 1998. That is absolutely impressive, and one of the primary ways he has done this is by investing in international investment opportunities, with China in particular. In fact, Li Lu was the one who convinced Munger and Buffett to purchase BYD Auto, a stock that has grown by 59 times in value since Berkshire’s initial investment in 2008.

[Oxazepam]

If we don't want to buy stock from chinese company, why do we buy their products?

[TheBladimir]

No system has made more money and safe for the investors than USA

[TickerSymbolYOU]

I love the title of this video! It somehow seems very familiar 🤔 (just teasing; awesome coverage of the China situation)

[iceman]

I sold asap when I found out that the Nio I thought I bought was just a caribian loop hole. I had bought between $4 and $2ish a share had 100+ shares I got out just a tiny gain just above break even did I loose out on alot of gains yes big time but I'm not mad because I never really owned the shares and never could China controles that whole game. Your position you think you hold is an illusion.

[kstaxman]

No China for me. I'm with Cathy and it's hands off.

[BoersenCrashKurs]

I sold every chinese companies in my portfolio.

[smb]

She actually has a brain. Who in their right mind would invest in Chinese companies that within a flip of a switch can be closed down, taken over and just obliterated at a moments notice?

[hkchan]

I wouldnt touch the Chinese stocks to start with. Well done Cathie

[Tucanaldeinversiones]

I see equal and better quality business in usa why to get the extra risk I sold half of my position of nio and put it in to more Tesla

[alanleung]

0:40 Oh snap, don't let the 5 cent army see that picture

[silvercs]

Thank you Cathy. Now I do not have to sell out of my ARK funds.

[rich]

Im with Cathie and own all her funds and up over 100 % average.

[hcpscratch]

Well done! You brought up the HUGE concern about major cold or hot war concerns being a drag on investing in China! Most investment channels do not mention this LONG-TERM concern! There will be TRUE decoupling if CCP continues its aggressive behavior towards the rest of the world. I say this despite being long BABA and BIDU...But at least I have that issue in my risk/reward equation.

[bradhaaf]

They were just completely devastated by typhoon, of course..

[switzerland]

For me China just doesn‘t give the financial stability needed in order for stocks to be successful. It doesn‘t mean that the companies won‘t be but there is an enormous risk that these are not correlated. Look at countries like Switzerland and USA. They thrive because of their legal stability and not despite. The Chinese government is good in capturing these companies and not letting the stock market beeing to powerful and free.

[sinalbertckwong]

.... taking profit now at the same instant driving down price to buyback at a lower but favorable price. A strategic move by private equity professions.

[SimonCU]

Im doing what everyone is not doing... Most people are broke... If most people are selling Chinese stocks I buy... I have earned a lot of money that way. I used to buy when things were expensive and overpriced and I lost a lot of money for buying overpriced stocks. Then I started to buy when everyone is selling. I made millions that way.

[mcaz]

Remember to check this video again in a year.

[darrenprior]

A country that can make a CEO disappear for three months without notice. What's not to love?

[nolisto]

Dude, Charlie Munger only has 3 months left to live. You can't invest in whatever he's investing in, or Warren. Follow someone that has a couple of decades left in this physical realm