While many investors have been interested in offerings from China's big banks, hedge-fund manager Warren Lichtenstein is applying the principles of small-cap value investing to China, copying a style of stock-picking that has served him well in the U.S., The Wall Street Journal reported. The activist investor, well-known in Asia for pushing through changes at South Korean tobacco maker KT&G this year, has just led a group of mainland Chinese investors in buying a 30 percent stake in a publicly traded cigarette-paper maker Mudanjiang Hengfeng Paper, according to a company filing Tuesday to the Shanghai Stock Exchange. But given Mr. Lichtenstein's track record, his bet on Mudanjiang Hengfeng, which has a market capitalization of about 130 million US dollars, should spur people to look beyond huge Chinese companies. Steel Partners' portfolio has returned 24 percent, before fees, annually since the fund's inception in 1993. Some other China investors are also looking at the small-caps, which are generally defined by portfolio managers as companies with less than 1 billion US dollars in market capitalization. Skeptical of the valuations commanded by China's hot initial public offerings, these investors say expectations for small-capitalization stocks may be closer to reality.