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Stocks of the Week!

In this email:

• E-Commerce Giant You’ve Been Sleeping On 😴📦

E-Commerce Giant You’ve Been Sleeping On 😴📦

I’ve sold nearly everything apart from my Asian stocks for now. And there’s one Asian stock that screams value even more than the rest of them.

I’m talking about JD.com.

They’re China’s biggest e-commerce company by revenue & have got a delicious mix of quality, growth, and value that’s worth paying attention to.

You’re probably familiar JD.com’s rivals like Alibaba & PDD Holdings (both decent buys right now too, in my opinion). But JD is a little bit different.

Alibaba can be touch & go on the quality of product you receive. There’s also not much of vetting process for wholesalers.

Replica Rolex? You got it. Counterfeit card games? Just add to basket!

JD focuses on quality. JD holds its inventory, which means customers get the real deal and not a sketchy knock-off.

But there is a (quite literal) cost to this. Slimmer margins.

Quality control isn't cheap but a stronger reputation & brand image in a competitive eCommerce space will pay dividends.

If you can get a company that delivers higher quality product at a better valuation, that’d be a steal right?

Well, let me show you the numbers.

JD is the cheapest of the three, yet it's still growing strong at 130% year-over-year earnings growth rate.

The board know that they’re trading at a steal of a valuation too.

JD's buyback program is on fire! In Q1, they bought back $1.2 billion worth of stock. If they stay at that rate for the year they could retire 12% of their shares. Fewer shares mean higher earnings per share (EPS).

It’ll also help pump share price thanks to good old supply & demand.

Less shares with the same or more demand = higher price per share = a big smile on my face.

So this all sounds great but isn’t investing in China risky? And isn’t the Chinese economy slowing down?

That has been true. But thing’s could be changing. China’s economy is expected to grow beyond its 5% target & online retail sales up 12.4%.

That put’s JD in a pretty nice spot.

More economic growth means more spending, and JD is perfectly positioned to cash in.

Even if China’s economy doesn’t grow as expect, JD isn’t just sticking to China anymore. They’re looking at global markets, partnering with companies like MINISO in Australia and Malaysia. They’re even eyeing acquisitions in the UK. No matter what happens in China, this’ll be a game-changer for opening up new revenue streams if they do it right.

And they have a habit of doing it right. Their long-term growth trend will speak to that.

Revenue: 17.9% CAGR. EBITDA: 49% CAGR, Net income: 50% CAGR, Free cash flow: 24% CAGR

JD's profitability metrics are solid too with an 8.85% gross margin and an 11.5% return on equity.

Even a conservative valuation on this to recent highs gives me a 50% plus return. And if I’m a dreamer staring at the all time highs it’d be a 300% return…. But let’s get to the recent highs first.

It’s got the quality, growth, and value that make it an easy pick in the e-commerce space.

Sure, there are risks – geopolitical tensions and fierce competition – but JD’s current valuation gives it a super soft cushion to land on.

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That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️