Hello I am here to talk about one of the stocks that I like. After doing some research I have decided to start building a position on it. I am going to list out the reasons I like the stock and the risks I see for JD.
Let's start with the big macroeconomics
We all know China’s economy is pretty bad right now. There’s a reason a lot of Chinese stocks have been beaten down. Also the geopolitical tensions does not help. However I do see China making a recovery over the coming years. This is a pretty safe bet IMO.
https://institutional.fidelity.com/app/item/RD_13569_40890/business-cycle-update.html?pos=T
If you check the link you can see China is ahead of everyone in the business cycle. Most of the world has yet to experience a real contraction. This brings me to another point: Investors will start to chase yield when the US starts their contraction phase. China looks to be the only market that will be out of their contraction phase at that point.
Michael Burry
https://stockcircle.com/portfolio/michael-burry
I know say what you want about him miss predicting the last x amount of recessions but at the end of the day he has good returns and has a history of picking up on value stocks. His current 2 top holdings are BABA and JD. Looking at his portfolio was what tipped me off to look into them. You also have the opportunity to get in at a lower price than Michael Burry.
Pros
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The average forecast for JD in 12 months is $40.58
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EBITDA Margin has a lot of room to grow 2.27% compared to BABA (19.47%)
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Predicted to grow until 2027
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Generate a lot of revenue compared to their market cap of 42B
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$0.74 Dividend
Risks
- Low EBITDA Margin (because if it slips then they can easily become unprofitable)
- Geopolitical tensions
- Charts are pretty bearish (stock has gone almost nowhere past few years)
- Betting on China
- Question that came across my mind was “WHERE IS ALL THEIR MONEY GOING?”
My Plan
I am going to start building a position on JD. I have pretty bad timing so I will be buying in set increments while keeping an eye on their earnings. I will look for leaps given the right price. I also like BABA but I believe JD has high potential for return. This is a higher risk reward play.
Whether you agree with me or not good luck on your investing journey!
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