4. Avantis Emerging Markets Equity ETF (NYSE:AVEM)
5-Year Share Price Returns as of March 12, 2024: 29.58%
Avantis Emerging Markets Equity ETF (NYSE:AVEM) ranks 4th on our list of the best emerging market ETFs to buy. Avantis Emerging Markets Equity ETF (NYSE:AVEM) invests in a diverse range of companies across emerging markets, spanning different market capitalizations. Established on September 17, 2019, the fund holds net assets totaling $5 billion as of March 11, 2024. Avantis Emerging Markets Equity ETF (NYSE:AVEM)’s portfolio comprises 3,521 stocks, with a net expense ratio of 0.33%.
PDD Holdings Inc. (NASDAQ:PDD) is one of the top holdings of Avantis Emerging Markets Equity ETF (NYSE:AVEM). PDD Holdings Inc. (NASDAQ:PDD) is a multinational commerce group and its flagship platform, Pinduoduo, is an e-commerce platform offering a wide range of products. The company also operates Temu, another online marketplace. Jefferies Financial upgraded PDD Holdings Inc. (NASDAQ:PDD) shares to Buy on March 11, anticipating significant growth in fourth-quarter revenue, with a projected 16% quarterly and 101% yearly increase to RMB80 billion. Jefferies also raised the price target for PDD shares to $157 from $117, reflecting their optimistic outlook.
According to Insider Monkey’s fourth quarter database, 71 hedge funds were bullish on PDD Holdings Inc. (NASDAQ:PDD), compared to 66 funds in the prior quarter. Lei Zhang’s Hillhouse Capital Management is the largest stakeholder of the company, with 10.1 million shares worth nearly $1.5 billion.
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 break even 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.”
