China Stock Ideas

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JD.Com, Inc. (NASDAQ:JD)


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Yahoo Finance

Sorina Solonaru

November 26, 2020


https://finance.yahoo.com/news/10-best-growth-stocks-buy-220447261.html


Dalio slightly increased the position in JD.Com, Inc. (NASDAQ:JD), the technology-driven Chinese retailer. Bridgewater’s stake in the JDD is currently worth $129.5 million at the end of September, up by 21% from a quarter earlier. 87 hedge funds held positions in the stock at the end of June against the all time high of 90 at the end of the first quarter.

JD.com announced a positive earnings surprise of 30% in Q3, and its stock returned 35.5% since the end of June (through 10/16), outperforming the market by an even larger margin. According to our calculations, JD.Com, Inc. ranked #27 in our 30 most popular stocks among hedge funds, 2020 Q1 rankings. Here is Dan Loeb’s optimistic review of the two e-commerce giants, JD and Alibaba:

“During the quarter, we took advantage of jitters about China’s relationships with Hong Kong and the U.S. that created an air pocket in trading of Chinese-related shares to establish new positions in e-commerce leaders Alibaba and JD.com. As we have articulated in prior letters3, our outlook for Alibaba and the broader Chinese e-commerce market is bright. We believe online gross merchandise value (“GMV”) will grow at a mid-teens CAGR over the next five years, propelled by both (1) rising consumption per capita, as the Chinese retail market is equal in size to the U.S. despite four times as many consumers, and (2)increased penetration of retail by online, a trend which we believe has been structurally accelerated by the COVID- 19 pandemic.

As the e-commerce market matures, we believe Alibaba & JD will leverage scale and growing repositories of transaction data to increase monetization of their platforms through targeted advertising to improve revenue yields (revenues as a percentage of GMV) from a starting point of less than 4% today. As a point of comparison, brick-and-mortar retail store rent expenses in China are greater than 10% of sales on average, which provides a significant umbrella for online marketplaces to take a greater share of GMV through a combination of commission and advertising spending as online retailer cost structures converge with brick- and-mortar retail.”

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