During the fourth quarter we established four new positions while adding to a number of existing investments. WH Group Ltd (HKSE:00288, Financial) (Hong Kong), under the trade name Shuanghui, is the largest pork processor in China, which recently acquired Smithfield Foods, the largest U.S. player. We believe the growth potential in China is significant, given the country’s preference for pork, and particularly given that China appears to be in the early stages of a secular trend towards fresh processed and packaged proteins, which earn premium pricing and margins. The merger will allow for shared best practices, technology transfer, and operating synergies, while allowing this global leader to take advantage of pricing differences across its major markets. The combined company should generate attractive return on capital and cash flow, and with roughly half of its profits now coming from the U.S., we believe WH Group offers an attractive natural hedge against any future depreciation in the RMB. We also initiated positions in three banks.
From Baron Emerging Markets Fund fourth quarter 2016 commentary.
