10 Best Foreign Stocks To Buy Now

3. PDD Holdings Inc. (NASDAQ:PDD)

Number of Hedge Fund Holders In Q2 2024: 86

PDD Holdings Inc. (NASDAQ:PDD) is a Chinese eCommerce company that has taken the local industry by storm. It has done so by setting up a unique business model that leverages the Chinese consumer spending slowdown to its advantage. PDD Holdings Inc. (NASDAQ:PDD) does this by enabling users to buy in groups, which lets them bargain for lower prices and increases the volumes shipped per transaction on its platform. Through its success in China and by using its well established merchant network to offer lower prices, PDD Holdings Inc. (NASDAQ:PDD) is also eyeing Western markets. It operates in the West through Temu, and success in China could set it up well when it comes to competing against giants like Amazon. However, customer satisfaction, along with delivery times, remains a key part of PDD Holdings Inc. (NASDAQ:PDD)’s hypothesis. It has faced complaints from Europe’s consumer protection group, which could lead to action and a loss of brand image. Additionally, PDD Holdings Inc. (NASDAQ:PDD) also remains vulnerable to tariffs on Chinese goods, and this was also the case in September when the Biden Administration’s tariffs against Chinese goods raised the risk of increasing prices.

Hayden Capital mentioned PDD Holdings Inc. (NASDAQ:PDD) in its Q2 2024 investor letter:

“Pinduoduo (PDD): A few weeks ago, Latepost (a leading Chinese technology news outlet) confirmed Pinduoduo’s online grocery initiative is solidly profitable (LINK). According to the article, Duoduo Grocery is able to achieve ~5% net profit margins in competitive markets (where they go up against Meituan Select). In non-competitive markets, they can achieve ~10 – 15% net margins.

The company doesn’t disclose the exact scale of Duoduo Grocery, but our calculations indicate it’s likely around ~RMB 300BN this year, and still growing in the double-digits. At that level, the division is likely contributing ~US $2.5BN in annual profits17.

It’s an impressive result, but admittedly, not a huge needle-mover in light of the total $17.6BN net profits the company is expected to make this year (~14% of overall profits).”