U.S. tech companies are riskier than China’s: Satori Fund’s Niles

U.S. tech companies are riskier than China’s: Satori Fund’s Niles

welcome back to squawk earlier we got that live report from eunice you detailing china’s latest squeeze on the tech industry today’s example state media ramping up criticism of social media platforms and in an earnest call yesterday tech company tencent warning that more internet regulations are likely its shares and those of fellow industry giant alibaba falling in trading today contrast those two stock performances to apple and microsoft over the past few months you can see the difference but right now we’re going to talk with a well-known investor who says he’s sticking with a basket of chinese internet stocks he bought last month as the country’s market sold off joints right now is dan niles founder and portfolio manager of the satori fund good morning to you this is a contrarian play to some degree at this point we’ve been talking about uh alibaba’s stock looking a bit like a time machine which is to say if you thought you missed the train in 2019 you can you can get on the train right now and you’d be back there absolutely i mean i think the thing you have to remember is we’re a hedge fund so the other thing that we did when we put on this basket of names on the long side in in china is that we put on a much bigger basket of stocks on the short side in the us and as you brought up earlier you’re sort of in a time machine and if you look back historically in 2018 when donald trump went after chinese companies the kweb which is a etf of internet related stocks that went down 47 over the course of a year but the nasdaq 100 was down 12 if you look at it this time in about six months that kweb etf has gone down 57 percent but the nasdaq 100 is up 10 over that period of time so for us we’ve got you know roughly 10 in a basket of over 50 chinese names um that were long but we have you know almost triple that amount the basket of u.s primarily focused on u.s tech stocks outside of the biggest uh six or so um that were short against it and that’s really how we’re playing this so you know we we reached for the falling knife we definitely got a few fingers cut off on the long side but the shorts have actually worked out pretty well in terms of the smaller shorts um the smaller capitalization shorts sitting inside the text and dan just to put a fine point on this have you doubled down at all in the last month as things have have progressively gotten worse on those long plays in china um no what we’ve done is we’ve gotten a lot more selective andrew and and and quite honestly this is the thing i think to keep in mind when we started buying this it was because you had us on i think in early july and we said look we won’t get involved in chinese tech names until the government has sort of backed off and then on july 27th the government had a the regulators had a call with a lot of the big brokerage firms saying you know people are misunderstanding what’s going on stocks could stabilize at any moment we thought okay you know down 50 is enough and they’re going to proceed more slowly but then that started to change again on august 11th with a five-year plan to regulate these names and then we’ve seen more news come out pretty much every day so you know for us we’re as we’ve said we’re losing patience i guess is one way to put it because it’s hard to trust what’s coming out of chinese state media when it changes from stocks could stabilize at any moment to you know we got a five-year plan for regulating these companies and common prosperity for all but you know for right now at least we feel we feel us tech companies with the fed about to raise rates have a lot more risk given valuations at record levels and investor sentiment that’s piled in on the long side
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U.S. tech companies are riskier than China\'s: Satori Fund\'s Niles

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