1. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E Ratio: 9.84
Earnings Growth: 12.68%
Number of Hedge Fund Holders: 78
PDD Holdings Inc. (NASDAQ:PDD) is another Chinese e-commerce company that owns and operates renowned platforms such as Temu and Pinduoduo. Its strategic edge lies in its group-buying model from small and medium businesses, which allows its listings to be cheaper than its competitors. Its brand Temu now operates in more than 50 countries globally and has become one of the fastest-growing platforms around the world.
GreenWood Investors in its Q4 2024 investor letter highlighted that PDD Holdings Inc. (NASDAQ:PDD) has become a fast-growing player in the industry and has achieved Gross Merchandise Value comparable to other giants such as Amazon and JD. However, it has done so in only one-third time compared to its competitors. The investment management firm remains confident in Temu and sees PDD Holdings Inc. (NASDAQ:PDD) as an indispensable player in the industry. During the fiscal third quarter of 2024, the company grew its top line by 44%, year-over-year. Despite competitive pressures, the company is focused on building a sustainable ecosystem through merchant support and safety updates. It is the best undervalued cyclical stock to buy right now.
GreenWood Investors stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q4 2024 investor letter:
“Aside from transitory foreign exchange translation losses (as opposed to trading losses), the two other notable detractors from our portfolio were MEI Pharma and PDD Holdings Inc. (NASDAQ:PDD) in 2024.
PDD Holdings founder Colin Huang is who inspired us to “run 3x faster,” as the relentless corporate culture of PDD has built an e-commerce company with roughly the same GMV (gross merchandise value) of Amazon in one-third the time it took Amazon to build itself. Shares reacted negatively when the company decided to reinvest its record margins into even faster growth and creating a healthier supplier ecosystem. As it looks set to create a second Amazon with its international site Temu, we are highly attracted to the opportunity. Sales are growing 4x faster than Amazon’s, yet shares are priced at less than a quarter of the Amazon earnings multiple.
PDD is a perfect example of why we want to look outside of the “Big Ten” companies that are nearly a third of global market indices. We would not want to compete with the demanding corporate culture of PDD and Temu. Its operating model is relentless at identifying efficiency throughout the manufacturing and selling supply chain. Not only is it a more formidable competitor than Amazon, and growing much faster, but the valuation is 4x more attractive than Amazon’s…” (Click here to read the full text)
While we acknowledge the potential of PDD Holdings Inc. (NASDAQ:PDD) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PDD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
