Mr. Siris has long been one of the most public faces of the bull case for small and midsize Chinese companies listed on Western exchanges. He runs one of relatively few funds, and one of the biggest, devoted exclusively to such companies. He writes a newspaper column that has discussed China investing, highlighting some of the 70 stocks in his Guerrilla Capital Management LLC hedge fund.
In recent months, investors of all stripes have seen red in China: Hedge funds, mutual funds and private-equity firms all have taken their licks as shares have tumbled amid questions from regulators about the truthfulness of statements about their finances and operations.
The Securities and Exchange Commission has said it is investigating accounting and disclosure issues at some Chinese companies that trade on U.S. exchanges, and, last week, it formally warned investors on the risks of buying some Chinese stocks.
Hedge fund investor Peter Siris continues to invest heavily in China, despite recent negative news and financial declines. WSJ's Steve Eder reports. Photo: REUTERS/Brendan McDermid
Mr. Siris, 66 years old, is fast becoming a lone figure in the tug-of-war between China bulls and bears.
"It is hard to be more bullish than ever when every day you get attacked from all sides and every day you seem to lose money," says Mr. Siris, who launched his China fund in 2007. "But based on the individual companies and their fundamentals, I'm very bullish."
Mr. Siris is no novice to the China investment game. A Mandarin speaker, he first visited the country in the early 1970s, when he was helping manage his family's fashion-accessories manufacturing business after graduating from Harvard University's graduate business school. That job put him face to face with Chinese businessmen and led to him serving on a U.S. trade mission to China, he says. In the 1980s, he wrote a historical spy novel, "The Peking Mandate." While writing the book, he ran a small firm that assisted U.S. companies with establishing business lines in China.
Mr. Siris's background also includes a 15-year stint covering retail, apparel and consumer-products stocks for a few different Wall Street firms before he launched Guerrilla Capital in 1999. It was designed to bet on cheap stocks and against expensive ones. The name mirrors an investing handbook he authored in 1998 in which he portrays individual investors as up against better-armed professional investors.
His China-focused fund, Hua-Mei 21st Century Partners LP, has about $100 million in assets under management and annualized returns since its inception through April of about 22%, according to Mr. Siris. Hua-Mei means "China America" in Mandarin.
Recent weeks have been decidedly tough amid the drumbeat of bad news about China stocks. The fund, which includes some stocks whose trading has been halted, is down about 20% this year.
Andrew Left, who runs Citron Research, a website that publishes bearish reports on stocks, including some owned by Mr. Siris's fund, said in a posting last week that Mr. Siris "sounds like a bad stock promoter praying his stock doesn't go any lower."
He has never met Mr. Siris, but maintains, in an interview, that the hedge fund's recent dismal performance numbers "speak for themselves." Mr. Left adds: "Part of investing is knowing when to get out. He had the opportunity."
Mr. Siris, whose investing column runs in the New York Daily News, responds to the bears: "In my view, the short sellers are not really as on top of the companies as we are." His staff includes four analysts in China and two in New York who regularly visit companies to try to ascertain that they are what they say they are.
One of Mr. Siris's biggest investments is in
Harbin Electric Inc. which, on May 27, issued a news release to "categorically deny" rumors its chief executive and top finance official had "gone missing." Instead, it said they were "at work and are fully performing their respective corporate duties." A board committee at the electric-motor manufacturer is evaluating an offer from the CEO to take the company private; the shares recently were down as much as 40% from a 52-week high.
Mr. Siris shakes his head at those rumors, saying he was in Harbin, China, meeting with the CEO the day he was supposedly absent. "I wondered if he disappeared before breakfast or after breakfast," Mr. Siris quipped.
To be sure, Mr. Siris says, there are frauds out there. He also acknowledges mistakes, saying a lesson learned over the years is that, if there's the "least bit" of questionable activity, he won't "hang around."
He recalls an occasion when the CEO of a Chinese firm twice missed meetings with him, prompting him to walk away from a possible investment. Mr. Siris says he also is betting against some two dozen Chinese stocks, including
Longtop Financial Technologies Ltd. Longtop's chief financial officer and external auditor resigned in May amid an SEC inquiry over its accounting practices; the financial-technology firm has said a board committee hired a U.S. law firm to coordinate with the SEC in launching an independent investigation.
Clearly, some stock pickers are less convinced of the prospects for many China shares than is Mr. Siris. William Wells, founder of Memphis-based Pope Asset Management, who counts Mr. Siris as a friend, is trimming some of his positions in Chinese companies. Still, "with prices this low, I don't know that it makes sense to get out as long as what you have isn't fraudulent," he says. About one-third of the $600 million managed by Pope is in Chinese stocks.
To reassure Guerrilla Capital's investors, Mr. Siris invites them to travel with him to China. Scott Montgomery, of Spartanburg, S.C., joined a recent 10-day trip that included meetings with executives from about 30 Chinese companies.
"The Chinese have gotten a bad rap, but I don't think all of them are bad," says Mr. Montgomery. He is considering investing more with Guerrilla. His family has about 4% of its money invested with Guerrilla, half of it in the China fund.
Of Mr. Siris, he says, "I don't think he'll always be right, but he'll be right more than he's not."
