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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Longriver outperformed in Q1 despite negative returns, with manager increasing Chinese equity exposure to 25% of portfolio. Rhodes argues Chinese stocks offer compelling value after years of deleveraging, highlighting BYD as beneficiary of structural auto industry shift to electric vehicles."
Longriver Partners returned -0.3% in Q1 2025, outperforming the MSCI AC World's -1.2% return. Manager Graham Rhodes argues that despite geopolitical tensions and Trump's new tariffs, now is an excellent time to buy Chinese equities, drawing parallels to investing in US stocks during 2010-2011 post-financial crisis deleveraging. China has undergone similar deleveraging since Beijing burst the real estate bubble in 2021, with many businesses transforming operations and improving capital allocation while valuations remain depressed. DeepSeek's AI breakthrough rekindled confidence in China's technological capabilities despite US sanctions. Rhodes increased Chinese exposure from 11% to 25% of the portfolio, highlighting BYD as a key new investment. BYD exemplifies the structural shift from mechanical to electrical vehicle architectures, leveraging vertical integration to dominate the EV market with 34% share in China. The company achieved 42% revenue growth and 20.7% gross margins despite aggressive pricing. Rhodes believes the auto industry transformation creates long-term opportunities for winners while incumbents face declining market share.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Manager demonstrates very high conviction through significant portfolio allocation changes, detailed fundamental analysis of BYD, and strong comparative historical analogies. The extensive case study approach and willingness to concentrate 25% in Chinese equities despite headwinds shows decisive belief in the thesis.
Growth Outlook
Manager expresses strong optimism about Chinese equity opportunities, comparing current environment to attractive US investment period in 2010-2011. Despite acknowledging geopolitical tensions and tariffs, he views the structural transformation in China and auto industry as creating favorable long-term investment conditions.
Risk Appetite
Manager significantly increased Chinese equity exposure from 11% to 25% of portfolio, demonstrating aggressive risk-taking and bullish positioning. This represents substantial capital deployment into what many consider a risky geography, indicating high risk appetite and conviction in the opportunity.
Capital Deployment
Manager aggressively deployed capital by more than doubling Chinese equity exposure from 11% to 25% of portfolio, representing significant active positioning. This substantial allocation shift indicates strong capital deployment activity during the quarter.
Forward Guidance
Manager explicitly states intention to increase personal investment in the fund and expresses confidence about timing for Chinese equity investment. Forward-looking statements emphasize opportunity in structural industry transformation and expectation that China will emerge stronger from current challenges.
Language Signal
Language contains strong positive signals around opportunity, value, and structural advantages, particularly regarding BYD and Chinese equities. Terms like 'great time to buy', 'compelling idea', 'attractive margin of safety' dominate, though balanced with acknowledgment of geopolitical risks and market volatility.
Perceived Risk
Manager acknowledges meaningful risks including geopolitical tensions, tariffs, and potential prolonged recovery in China. However, he frames these as manageable headwinds rather than systemic threats, suggesting moderate risk perception balanced against opportunity assessment.
Opportunity Density
Manager sees rich opportunities in Chinese equities broadly and specifically in structural auto industry transformation. References to attractive valuations, business transformations not reflected in prices, and multiple investment themes suggest abundant opportunity set in targeted areas.
Time Horizon
Manager emphasizes long-term value creation, structural industry shifts, and multi-year transformation themes. References to riding long-term value creation and viewing investments like real estate or private companies indicate very patient capital approach with multi-year time horizons.
