In this article, we will take a look at the 7 best e-commerce stocks to buy according to hedge funds.
The Retail Debreif: Growing Consumer Confidence in the US
E-commerce is growing faster than expected and as new avenues of selling online open up, companies are bound to keep up with trends and innovative strategies. According to a report by Forbes, the e-commerce industry is expected to grow to a valuation of $7.9 trillion by 2027 from $6.3 trillion in 2024. In 2027, 23% of retail purchases are expected to be made online, up from 20.1% in 2024.
In the United States, low-income households, with a yearly income of $50,000 or less, happened to spend the most on online spending compared to other groups. On October 17, Reuters reported that retail sales in September increased, as gas prices fell, allowing consumers to spend elsewhere. Overall, the average consumer in the United States spent mostly on clothing, health and personal care stores, and miscellaneous items. Amid rising consumer confidence and spending, the Atlanta Fed raised its GDP estimates for Q3 to 3.4%, up from a previous guidance of 3.2%. Overall, retail sales grew by 0.4% last month.
READ ALSO 8 Best Communication Stocks To Buy According to Analysts and 8 Best Augmented Reality Stocks Under $5 to Buy
Chinese E-commerce Platforms: A Threat or Opportunity?
Chinese e-commerce stocks have been on the rise, despite uncertain macro-economic conditions in the country. As the Chinese government attempts to stimulate the economy, these companies may perform better than expected, meaning other global e-commerce stocks will have to ramp up their investments in sustainable growth strategies. On October 21, Reuters reported that the world’s largest luxury brands in France and Italy reported a decline in quarterly sales as the growing second-hand and grey market for luxury goods in China continues to expand, and demand for luxury brands falls. The second-hand luxury goods market is estimated to be valued at $57 billion, fueled by platforms such as DeWu, where used luxury products are sold at discounted prices. Reuters estimates that DeWu reported a 19% increase across its 48 brands during Q2 2024. Since China makes up 25% of the revenues in the retail sector, consumers shifting to local platforms may cause a hit to global commerce and retail companies.
On October 9, Reuters reported that amid fierce market competition online shopping has been increasing in Europe and other parts of the world. The online shopping market in Europe is expected to reach EUR 958 billion in 2024, up from EUR 887 billion in 2023, representing an increase of 8%, or 5% in inflation-adjusted terms. However, e-commerce experts in Europe share concerns over the growing popularity of cheap e-commerce platforms, especially Temu, increasing competition for local brands. On the flip side, Temu states that it believes in supporting local brands and has invited local merchants in the United Kingdom, Germany, France, Italy, and Spain to join the platform.
The e-commerce industry is rapidly changing and growing, thanks to technology, macroeconomic conditions, and geopolitics. Despite the turmoil, some stocks continue to outperform others. That said, let’s take a look at the 7 best e-commerce stocks to buy according to hedge funds.
Photo by CardMapr.nl on Unsplash
Our Methodology
To compile the list of the 7 best e-commerce stocks to buy according to hedge funds, we looked at holdings of e-commerce ETFs and screened for Internet Retail companies on the Finviz stock screener. We sorted our screen by market cap and looked at the 20 largest e-commerce companies. We picked stocks that were the most widely held by institutional investors, as of Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best E-commerce Stocks To Buy According to Hedge Funds
7. Coupang, Inc. (NYSE:CPNG)
Number of Hedge Fund Holders: 62
Coupang, Inc. (NYSE:CPNG) is an e-commerce company based in Seoul, South Korea, with a market share of 25% in the country. The online retail company sells beauty, skincare, snacks, electronics, and clothing items on its platform, Coupang Marketplace.
Coupang’s exemplary e-commerce infrastructure contributes to its ranking on our list. It has more than 100 unique fulfillment centers covering more than 47 million square feet. This means Coupang, Inc. (NYSE:CPNG) serves 70% of the South Korean population living within a 7-mile radius. Technology is central to its business model. The company uses AI and machine learning to enhance customer experiences. In addition to that, its high speeds of delivery are supported by the growing automation within the company, reducing employee workload by 65%.
In the second quarter of 2024, the company logged $7.3 billion in net revenues, up by 25% year over year. Coupang’s product commerce revenue increased by 13% year-over-year and active customers by 12% in the fiscal second quarter of 2024. Apart from its strong e-commerce infrastructure, Coupang (NYSE:CPNG) is a customer favorite, as evidenced by its 21 million strong customer base.
While the company continues to experience customer growth, its priority lies in retaining existing customers. Overall, the company is a strong contender in the e-commerce industry because of its efficiency gains, its e-commerce network, and its expanding customer base. Coupang, Inc. (NYSE:CPNG) experienced a 150% increase in sellers joining its Fulfillment and Logistics by Coupang (FLC) network, a testament to its growth trajectory.
6. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 63
Sea Limited (NYSE:SE) ranks sixth on our list of the best e-commerce stocks to buy according to hedge funds. The technology company operates across three segments including e-commerce, digital financial services, and digital entertainment. The Singaporean company launched its e-commerce platform, Shopee in 2015, which is now functional in 8 countries.
While Shopee had negative EBITDA in Q2 2024, its revenue grew by 34% to reach $2.8 billion. In addition to that, Sea Limited (NYSE:SE) expects Shopee to report positive EBITDA by Q3 2024, consequently revising its gross merchandise value (GMW) growth rate guidance to mid-20%. During the quarter, the company worked on improving its ad take rate by developing stronger ad algorithms. In the same quarter, sellers who pay for ads went up by 20%.
As far as product deliveries are concerned, Sea Limited (NYSE:SE) is making significant progress. SPX, also referred to as Shopee Xpress, is an integrated logistics service by Shopee that delivered over 70% of orders placed in Asia within 3 days in Q2 2024. During the same quarter, the company also launched a “no questions asked return” program. This policy pushed buyers to manage order returns as efficiently as possible, oftentimes within 24 hours.
Overall, in Q2 2024, Shopee saw a 40% increase in gross orders and a 29% increase in gross merchandise value. The company has a strong presence in its markets with solid fundamentals and consistent financials.
Artisan Partners stated the following regarding Sea Limited (NYSE:SE) in its Q3 2024 investor letter:
“Top contributors to performance for the quarter included Southeast Asian e-commerce leader Sea Limited (NYSE:SE). Sea rose due to an improved competitive environment in its Shopee e-commerce business that set the stage for commission increases, while a positive inflection in its gaming business surprised market participants.”
5. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 84
MercadoLibre, Inc. (NASDAQ:MELI) is an online marketplace headquartered in Uruguay. The company was founded in 1999 and is on track to become the largest e-commerce company in Latin America. Today, MercadoLibre, Inc. (NASDAQ:MELI) is present in 18 countries and has over 65 million buyers and 12 million sellers.
MercadoLibre, Inc. (NASDAQ:MELI) is one of the largest e-commerce companies in Latin America and reported gross merchandise value worth $45 billion in 2023. The company has grown its revenue at a compound annual growth rate of 28% between 2016 and 2023. During the second quarter of 2024, the company generated $12.6 billion in gross merchandise value, up by 20%, and sold nearly 421 million items, up by 29% year-over-year.
Unique active buyers reached 56.6 million during the second quarter of 2024, up from 47.6 million in the second quarter of 2023, the fastest growth since the second quarter of 2021. Brazil contributed most to this trend, with a growth rate of 22% year-over-year. MercadoLibre’s (NASDAQ:MELI) e-commerce infrastructure is stringent, allowing it to facilitate faster deliveries. In 2023, MercadoLibre delivered 1.38 billion items, and 76% of them were delivered within 48 hours in the last quarter of 2023.
Overall, MercadoLibre, Inc. (NASDAQ:MELI) has grown its revenue at a compound annual growth rate of 28% between 2016 and 2023. Its consistent performance and growing customer base are its economic moat. To align with its expansion strategy, the company expects penetration to increase in growth markets such as Latin America, China, the United States, and the United Kingdom.
Lakehouse Capital’s Lakehouse Global Growth Fund stated the following regarding MercadoLibre, Inc. (NASDAQ:MELI) in its May 2024 investor letter:
“The Fund’s largest position, Buenos Aires based e-commerce leader MercadoLibre, Inc. (NASDAQ:MELI), reported a robust result that once again came in ahead of analyst expectations. Net revenue grew 30% year-on-year in U.S. dollar terms to US$4.0 billion while operating margins came in at 12.0%, providing a healthy balance of growth and profitability. Its marketplace business proved resilient, with strength in Brazil and Mexico more than enough to offset weakness in Argentina, which contacted by roughly a third due to weak macroeconomic conditions exacerbated by the 50%-plus devaluation of the Argentine Peso in December 2023. Whilst the economic situation in Argentia remains severe, we are comfortable with the risk as not only has management proved very adept at handling the challenges to date, but post the devaluation, the risk is meaningfully reduced as Argentina now only contributes 13% of the company’s total operating income. Overall, gross merchandise value still grew at 20% year-on-year to $11.4 billion and we continue to see significant opportunities ahead given the relatively nascent penetration of e-commerce in the region.”
4. PDD Holdings Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 86
PDD Holdings Inc. (NASDAQ:PDD) is one of the best e-commerce stocks to buy according to hedge funds. The company is a multinational e-commerce group that owns Temu and Pinduoduo, two online retail sites, and holds a 20% market share in China’s e-commerce industry.
In the second quarter of 2024, PDD Holding’s total revenue reached RMB 97 billion, an 86% increase year-over-year. It also generated an operating profit of $4.5 billion, hinting that it is extremely profitable. Temu, its proprietary e-commerce platform, is rapidly growing in the United States and Europe. It sells all sorts of items such as clothing, home decor, beauty, and handmade items, at affordable prices.
Temu, known for its low-priced products and fast deliveries, is set to become one of the most used platforms in the world. Temu has a 20% market share in its home country and is rapidly expanding in Europe and North America, known as the fastest-growing e-commerce platform in the world. What sets Temu apart is its expenditure on advertising and marketing. PDD Holdings’ (NASDAQ:PDD) company ensures that its ad spending on social media garners reach and attention from customers globally.
The company has placed significant bets on its cross-border growth, which may have been in jeopardy due to geopolitical tensions at the moment. Conversely, as the Chinese government takes steps to stimulate the economy, PDD Holdings Inc. (NASDAQ:PDD) is expected to accelerate rapidly. Its growth strategy is also supported by its expansive advertising strategy and optimized operations.
Baron Emerging Markets Fund stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its fourth quarter 2023 investor letter:
“We added to our digitization theme by building a position in PDD Holdings Inc. (NASDAQ:PDD), a leading Chinese e-commerce platform. Founded in 2015, the company has emerged as China’s second largest e-commerce player, capturing approximately 20% market share. In our view, PDD’s competitive moat lies in its team purchase model that facilitates bulk buying through direct partnerships with manufacturers, thereby eliminating intermediaries (e.g., distributors and middlemen) and lowering costs. Key factors driving the company’s meteoric growth include rising consumer demand for affordable products in China amid an economic slowdown, small-scale merchants seeking alternatives to Alibaba, and superior management execution. PDD’s revenue growth outpaces gross merchandize value growth owing to rising take rates as merchants aggressively compete for consumer traffic on the platform. In our view, PDD should continue to gain market share given its dominance in the value-for-money segment, growing affordable branded product offerings, and high operational efficiency. We believe the company’s growth will be further supported by the recent launch of its international e-commerce platform, Temu, which has become one of the fastest growing apps globally. Leveraging China’s excess manufacturing capacity, Temu has strong negotiating power with domestic suppliers and attracts global consumers with competitively priced products. Temu’s recent initiatives to improve unit economics, coupled with achieving variable breakeven in the sizable U.S. market, showcase management’s skill and commitment to sustained growth. We expect PDD to at least double its earnings and free cash flow in the next three years, with the potential for continued compounding thereafter.”
3. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 91
Alibaba Group Holding Limited (NYSE:BABA) is a technology and internet retail company that operates e-commerce sites that serve both consumers and small business owners, making it one of the best e-commerce stocks to buy according to hedge funds. The company also has stakes in cloud computing, logistics, digital media, and entertainment.
AliExpress is a popular retail site for mass consumers who can purchase all sorts of items such as appliances, office equipment, home improvement, and sports equipment, at an affordable price. The platform has over 150 million users and is present in 190 countries. On the supplier front, AliExpress now houses local merchants, allowing the company to meet the local needs of customers and maintain its market share. During the second quarter, the company also formed a partnership with a retailer in Brazil to open and operate a storefront on AliExpress and vice versa.
The company is focused on offering premium customer experiences through quality products at affordable prices. Its Alibaba International Digital Commerce Group segment grew its revenue by 32% year-over-year to reach $4.03 billion in the second quarter of 2024. Growth primarily came from its strategies targeted to achieve faster deliveries and enhanced shopping experiences, allowing users to source products from factories directly.
Alibaba Group’s (NYSE:BABA) platforms are used by more than 800 million people worldwide. It has a 40% share in the Chinese e-commerce market, as per estimates by the DBS Bank in Hong Kong, and is expected to experience growth amid economic turmoil and fierce competition.
Patient Capital Management stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2024 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) experienced a massive rebound gaining +47% in the quarter following the announced stimulus program from the Chinese government. As the unexpectedly strong government support was announced, shorts were reversed and any name exposed to China was off to the races. We have long liked Alibaba as the company has continued to trade at a significant discount to its sum-of-the-parts valuation. With most investors writing off Chinese companies entirely, you had an opportunity to invest in a high-quality business at rock bottom prices. Over that time, the company initiated both a dividend (0.9% Yield) and buyback program, repurchasing 9% of shares outstanding over the last twelve months. Despite the strong move in the quarter, the company trades at just 12.4x next-year’s earnings. We see potential for continued multiple expansion as the Chinese economy rebounds and the country becomes investable again.”
2. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 95
Walmart Inc. (NYSE:WMT) is one of the biggest retail companies in the world that operates retail outlets, wholesale units, and e-commerce sites in more than 19 countries serving over 255 million customers every week. Walmart entered the e-commerce space in 2000 and reported $100 billion in e-commerce sales in the fiscal year 2024, up from $73 billion in FY 2022.
Walmart’s e-commerce footprint is increasing, as evidenced by a 21% growth in its e-commerce segment overall during the fiscal second quarter of 2025. Total revenue, on the other hand, increased by 4.8% to reach $169.3 billion. In addition to that, the company is on track to add a staggering $130 billion in sales if it achieves its 4% sales growth target over the next five years.
The company’s journey to customer-centric innovation is accelerating. In FQ1 2025, the company launched a generative AI-powered product search tool and a data analytics platform allowing customers to shop more effectively and receive intuitive product recommendations. On October 9, Walmart Inc. (NYSE:WMT) launched its strategy to accelerate adaptive retailing. In the launch, the company revealed its Immersive Commerce platforms backed by artificial intelligence, generative AI, and augmented reality, to offer personalized shopping experiences to customers.
For the fiscal year 2025, Walmart Inc. (NYSE:WMT) expects net sales to increase by 3.75% to 4.75%, revised from its previous guidance of 3% to 4%.
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) ranks first on our list of the best e-commerce stocks to buy according to hedge funds. Amazon, functional in more than 20 countries, entered the e-commerce space in 1994 and now ships to more than 100 countries and regions. The company also specializes in cloud services, artificial intelligence, and digital streaming.
Amazon.com, its e-commerce platform is highly optimized allowing people to make purchases in less than 3 minutes and choose from more than 3 million available items such as electronics, clothing, home appliances, and furniture. During the first half of the year, Amazon.com Inc (NASDAQ:AMZN) delivered products to consumers at the fastest speeds possible. In addition to that, the company also increased product variety by bringing in more brands to their shelves.
In the second quarter of 2024, sales from online stores increased by 6% to reach $55.39 billion. Its expanding customer base and revenue growth can be attributed to its easy-to-use and optimized platform supported by rapid deliveries. So far this year, Amazon.com Inc (NASDAQ:AMZN) managed to deliver 5 billion items on the same day or the next, enhancing the overall experience for customers.
The company is working around the clock to ensure shoppers leave the Amazon online marketplace satisfied. Under some recent developments, the company introduced free restaurant deliveries for all prime members and an additional grocery subscription, allowing customers to save money on grocery items. As Amazon.com Inc (NASDAQ:AMZN) works to improve the customer shopping experience, the umbrella goal for the company is to reduce costs via efficiency gains. Overall, Amazon’s growth strategy coupled with its cost reduction initiatives, promises an increase in its global market share.
While we acknowledge the potential of e-commerce companies, 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
