Yum China Holdings Inc (YUMC)

She has held Yum Brands for years. When it spun off Yum China, her clients acquired some Yum China shares automatically. Yum China is strictly in China. It pays royalties to Yum Brands for its KFC and Pizza Hut brands. When she invests new money, she invests in Yum Brands, not Yum China. Yum China’s stock dropped significantly today. They have a good presence in China, as a first mover in their space, but the Chinese market is very competitive. The stock price has been volatile because of rumours that the company would be taken over by a Chinese group. With the 12% drop today, this might be a good time to step in to this stock. She had confidence in the consumer in China and this is a company within that space. However, her preference is with the parent, which has exposures to other growing markets such as India and Russia, as well as China. She prefers that diversification and the simplicity of the royalty model.

It is difficult to do business in China, and this is about half of Yum Brands (YUM-N) business. It still makes up a large chunk of their business because they are getting payments from them. Yum Brands is basically the KMC brand in China, the largest chain of restaurants in China. However, there were rumours that there were hormones in the supply of chickens, which hurt the company quite a bit, so they spun this part off with the majority of owners being Chinese. An excellent way to play the growth in China. If you can handle the risk, you will likely make some money in this.