November 12, 2018 / 6:23 PM / a month ago

Citron's Left makes U-turn and now sees value in China

NEW YORK (Reuters) - Andrew Left, whose Citron Research has published critical reports on Chinese companies and profited when their shares dropped, is now making a contrarian call by going long on some.

Andrew Left, the founder of Citron Research, speaks during the Reuters Global Investment 2019 Outlook Summit, in New York, U.S., November 12, 2018. REUTERS/Brendan McDermid

“There is value in China,” Left told the Reuters Global Investment 2019 Outlook Summit in New York on Monday. “I would take Alibaba all day long over Amazon.”

Wall Street has more muted views on China, as investors worry about the fallout of trade disputes between the United States and China and are concerned about falling stock prices at companies including e-commerce firms Alibaba and JD.com.

“You would think China is going out of business,” Left said referring to other investors’ current views. But Left, comfortable with being on the other side of conventional wisdom and ready to speak about it publicly, said there is good reason to be bullish on some stocks.

Many stocks have fallen to such an extent that they are ready to be scooped up, he said, and trade friction between Washington and Beijing could be less negative than initially expected because demand in China is growing so rapidly that exports will matter less.

Over the years investors including Jim Chanos’ Kynikos Associates, Carson Block’s Muddy Waters Research, Sahm Adrangi’s Kerrisdale Capital, and Left himself have made money by sniffing out irregularities at Chinese companies.

But the tide has turned some, Left said, and investors are more convinced about the future success of e-commerce and less willing to follow a short seller’s thesis about potential accounting fraud.

China may be one of the first places he invests clients’ money when he launches his first-ever hedge fund, Left said, two weeks after Reuters exclusively reported that he was launching one.

His fund, Citron Capital, is starting nearly two decades after some of Wall Street’s most prominent activist investors, including William Ackman, Daniel Loeb and David Einhorn, started their firms.

While these men manage billions of dollars, Left expects to raise no more than $300 million for his hedge fund. Smaller funds are often seen to be more nimble and able to generate higher returns.

Investors, he said, could benefit because he has lived through the financial crisis and more recent hot spots including the frenzy for bitcoin and cannabis stocks. Recently he made headlines by changing his mind on electric car maker Tesla, whose stock he long expected to drop.

“I’m more emotionally mature as an investor,” he said, adding he is ready to listen and change his mind.

Follow Reuters Summits on Twitter @Reuters_Summits

Reporting by Svea Herbst-Bayliss in New York; Editing by Susan Thomas

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