4 China Stocks to Buy After Billionaire David Tepper's Bull Call

Billionaire hedge fund manager David Tepper, founder of Appaloosa Management, is making waves again—this time with a bold bet on Chinese stocks. In a recent interview on CNBC, Tepper made it clear that he’s loading up on Chinese equities, citing the country’s unprecedented fiscal and monetary stimulus.

Tepper, worth some $20 billion thanks in part to his “Buy Everything” call on US stocks in 2010, is a man worth listening to.

While Chinese stocks have been stagnant for years, Tepper’s “buy everything” approach is now focusing on some of China’s biggest tech names.

Here’s why he’s bullish on four major players: Alibaba Group (BABA), Tencent Holdings (TCEHY), JD.com (JD), and Baidu Inc. (BIDU).

David Tepper’s portfolio is heavily weighted towards Alibaba, with a massive increase in holdings during 2024. His reasoning? Alibaba is significantly undervalued, trading at a forward earnings multiple of less than 9.5. This level of value is almost unheard of for a tech stock of Alibaba’s caliber, especially one with double-digit growth prospects.

Tepper also appreciates Alibaba's strong AI positioning, citing its leadership in cloud computing and artificial intelligence. In May, CEO Eddie Wu highlighted that AI will drive the company’s growth, with Alibaba poised to benefit from hosting AI applications on its cloud platform .

In addition, Tepper pointed out that Alibaba's stock, even after recent gains, is still at levels comparable to 2007, making it an excellent buy given China's internal stimulus.

The People's Bank of China's policies—including interest rate cuts, liquidity support, and encouraging stock buybacks—are providing a strong tailwind. With the government supporting corporate buybacks, Alibaba’s large cash reserves and undervalued stock make it an ideal candidate for significant appreciation.

Tencent Holdings is another giant in Tepper's China portfolio, benefiting from the same macroeconomic trends driving Alibaba. Like Alibaba, Tencent is a dominant player in China’s tech ecosystem, with a portfolio spanning gaming, social media, and fintech. Tepper sees Tencent’s diverse revenue streams as a key advantage, especially with the Chinese government rolling out aggressive fiscal stimulus aimed at boosting consumption.

Tepper also noted that Tencent, trading at historically low valuation multiples, offers double-digit growth prospects. As China’s economy begins to rebound from a prolonged slump, companies like Tencent are poised to capitalize on rising consumer spending, particularly in digital entertainment and online services.

Furthermore, Tencent has been encouraged by the Chinese government to conduct stock buybacks, providing a potential catalyst for significant share price growth.

JD.com, China’s second-largest e-commerce company, has also captured Tepper’s attention. JD is known for its robust logistics network and focus on high-quality products, which differentiate it from its competitors. Tepper dramatically increased his stake in JD.com, driven by the company’s strong fundamentals and its ability to benefit from China’s internal consumption-focused stimulus.

JD is trading at a steep discount compared to U.S. tech peers, offering single-digit P/E ratios alongside impressive growth. The government’s liquidity support and promotion of stock buybacks will likely further enhance JD’s ability to compete, making it an appealing long-term play for investors like Tepper who are focused on value.

Bull Case:

Baidu, often referred to as the “Google of China,” has a strong presence in search engine technology and is quickly becoming a leader in artificial intelligence. Tepper has expressed bullish sentiment on Baidu, particularly due to its deep investments in AI. Baidu’s forays into autonomous driving and its AI-powered cloud services position it for growth as China pivots toward more technology-driven industries.

With China’s fiscal stimulus creating a fertile environment for tech expansion, Baidu’s exposure to both consumer and enterprise markets makes it one of Tepper’s top picks. Like Alibaba and Tencent, Baidu is trading at historically low multiples, providing a rare opportunity to buy into a company with solid long-term growth potential at an attractive price.

Tepper’s conviction comes at a time when China’s government is pulling out all the stops to revive its economy. The country's recent stimulus measures include interest-rate cuts, liquidity injections, and, perhaps most notably, encouragement for companies to buy back stock. In Tepper’s eyes, this “internal stimulus” creates a unique environment where undervalued Chinese equities can soar, regardless of external pressures like potential U.S. tariffs .

He’s also clear about the risks. Tepper acknowledges the tense U.S.-China relations but dismisses them as a primary concern. As he explained, these issues are mitigated by China’s internal focus on economic recovery. He believes that China’s commitment to stimulating its economy and promoting stock buybacks presents a significant opportunity for investors willing to look past the political noise.

Disclosure: This content is for educational purposes only and should not be construed as financial advice. Sean O'Reilly may have positions in some of the stocks discussed in this post. Please conduct your own research or consult a financial advisor before making any investment decisions.