Alibaba Group (BABA) and Tencent (TCEHY), the two Chinese technology companies that have seen their stocks surge all year, could double in price during the next five to 10 years as the two expand around the globe into new markets.

That’s according to Justin Leverenz, a portfolio manager from OppenheimerFunds, that runs the $37.9 billion Oppenheimer Developing Markets Fund. He has held a position in Tencent, the Chinese gaming and messaging company since 2007 when the stock traded at $0.77 a share. Recently Tencent was trading down 1.79% or $0.86 to $47.16. For the year, shares are up close to 90%. Meanwhile, Alibaba, China’s largest e-commerce company, has a stock that is up 85% this year. Recently shares were trading 1.9% higher or $3.24 to $172.20. Those stock price surges have boosted Leverenz’s fund, which Bloomberg said has had 31% returns this year and is on track to have its best 12-month period in eight years. “These companies have the capacity to go global and change the world,” Leverenz said in an interview with Bloomberg this week. (See more: Alibaba Group Sells $7B Worth of Dollar Bonds.)

Extended Reach

In the case of Tencent, Leverenz thinks the company will gain market share in electronic payments and advertising, two areas where it has lagged behind Alibaba, which should boost its stock price. The company can also make money investing in companies for a minority stake. In November, Tencent disclosed in a Securities and Exchange Commission filing that it purchased 145.8 million non-voting shares of Snap Inc. (SNAP), the maker of the messaging app Snapchat, during the last quarter that ended in September, giving it a 10% stake. Last weekhe Wall Street Journal reported that the company's Tencent Music Entertainment Group and Spotify, the U.K. streaming music service company, are in talks to swap stakes in each other’s companies ahead of potential initial public offerings by the two in 2018. (See also: Tencent Music, Spotify in Talks Ahead of IPOs.)

As for Alibaba, the fund manager said it can expand its digital payments, media and retail businesses in China, which should help it grow even more. But what Leverenz sees as the biggest opportunity is bringing the businesses of both technology companies outside of China. “In places like Indonesia, Vietnam, Africa, people don’t have wallets full of credit cards the way they do in the United States,” said Leverenz. In China, consumers are used to making purchases via their mobile phone and the fund manager thinks that could take off in other countries. With China accounting for the lion’s share of both companies' revenue, expanding outside of the local market presents a big opportunity, he said.

 

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