8 High Growth High Margin Stocks to Invest In Now

2. PDD Holdings Inc. (NASDAQ:PDD)

5-Year Net Income CAGR: 74.92%

TTM Net Profit Margin: 28.93%

Number of Hedge Fund Holders: 86  

PDD Holdings Inc. (NASDAQ:PDD) is a Chinese online retailer that focuses on group buying and discounted prices. It offers products like consumer electronics, apparel, groceries, and more. Its business model revolves around aggregating large groups of buyers to negotiate lower prices from suppliers, passing the savings on to its users.

It also owns the online marketplace Temu, which is expanding rapidly in Europe and North America and has the potential to become one of the world’s most popular online shopping destinations. The company has experienced impressive growth in the second quarter of 2024, making $13.63 billion in total revenue, an increase of 89.93% from a year-ago period, driven by an increase in revenues from online marketing services and transaction services. Revenues from the marketing services and others were up 29%. Revenues from transaction services were up 234%.

In Q2, the top-line growth slowed down significantly versus the last few quarters. Further slowdown is inevitable as a result of competition and global uncertainties. However, the user base and cross-border business continue expanding. PDD Holdings Inc. (NASDAQ:PDD) has invested heavily in R&D to improve its platform for merchants and customers, contributing to its overall success and growth.

In September, its stock price soared 40% due to China’s economic stimulus efforts. Despite a negative news item regarding trade loopholes, the broader market rally fueled by interest rate cuts, reserve requirement reductions, and a focus on boosting consumer spending lifted the company. Later in the first 10 days of October, its stock was down 7.2% this week, but investors are still up 314% over the past 5 years despite the recent dip. The company recently turned profitable, which could explain the long-term growth.

Hayden Capital stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q2 2024 investor letter:

“PDD Holdings Inc. (NASDAQ: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 profits.

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)…” (Click here to read the full text)