John Burbank’s Capital has filed a 13G filing showing a large 11.8% stake in 58.com Inc (NYSE:WUBA), a company which just IPOed on the NYSE. According to the SEC document, John Burbank owns 2,821,526 Class A Shares (held via 1,410,763 ADR shares). The Chinese company has been compared to Craigslist.
John Burbank’s interest in Chinese stocks
John Burbank discussed the Chinese investment landscape in his second quarter letter to investors, a copy of which was reviewed by ValueWalk. Burbank noted in the commentary that he was long on Qihoo 360 Technology Co Ltd (NYSE:QIHU). However, the hedge fund disclosed that it was is shorting Chinese companies dependent on GDP growth, as well as, old tech companies that are not innovating.
Chinese Internet companies, as the best way to play the Chinese consumer. China wants “national champions,” in our view, and is not likely to allow a U.S. company such as Google Inc (NASDAQ:GOOG) or Amazon.com, Inc. (NASDAQ:AMZN) to dominate the market. These companies target the growing middle class and are not as affected by slowing industrial growth.
So far, Burbank appears to have been making a smart bet. The 13G was filed on November 1st, which means Burbank likely bought shares at the open on 11/04/13. Since the IPO WUBA is already up close to 13 percent.
However, the bet on QIHU is even more impressive. In the Q2 John Burbank stated:
Qihoo 360 Technology Co. Ltd. (3% of Global Fund NAV) Qihoo is the dominant Chinese, PC security software provider and a leading Internet browser and mobile app store. It is a beneficiary of the adoption shift to online, mobile, and e-commerce in China.
Revenues grew 59% year-over-year last quarter, and Bloomberg estimate is for 96% year-over-year growth in the second quarter. Revenue is driven by both PC and mobile. Mobile revenue is nascent, but we think it has a lot of upside potential as China’s smartphone install base is expected to exceed PCs next year. Qihoo has 457 million monthly active users on PC and 332 million monthly active users of Qihoo products on smartphones.
The market cap is now over $7.6 billion.
Today, the market cap of the company is close to $20 billion, meaning a nice return for the hedge fund.