We recently compiled a list of the 8 Best Stocks to Buy for High Returns in 2024. In this article, we are going to take a look at where PDD Holdings Inc. (NASDAQ:PDD) stands against the other stocks to buy for high returns.
The broader market reached new record highs on October 11, driven by financial stocks posting stronger-than-expected quarterly results. Adding to investor optimism is the recent decline in U.S. inflation, which dropped to 2.4% in September, moving closer to the Federal Reserve’s 2% target. This has fueled hopes of a potential quarter-point rate cut at the Fed’s November meeting. As of October 16, the S&P 500 stood at 5842.47, only eight months after surpassing the 5,000 mark for the first time. Additionally, the September Consumer Price Index revealed a sharper-than-expected rise in consumer prices. However, Omair Sharif, president of Inflation Insights, told Yahoo Finance that while inflation data exceeded expectations, housing inflation is beginning to cool. He also noted a significant decline in food prices since the post-COVID surge, suggesting there are several positive trends to take away from the current market situation.
Adding to that, Carson Group’s chief market strategist, Ryan Detrick, believes the current bull market is still in its early stages, with more gains to come. However, he doesn’t foresee a repeat of the strong returns seen in 2023 and 2024, when the S&P 500 rose 24% and 22%, respectively. Instead, Detrick expects more moderate growth, noting that the average gain for stocks in the third year of a bull market is around 8%, aligning with the typical annual return.
Meanwhile, Jay Woods, chief global strategist at Freedom Capital Markets, highlighted that one of the most striking aspects of the current bull market is how few investors believed in it from the start:
“I think it’s important to preface it with when it started, no one believed it. They just thought it was a bear market rally. And then they doubted that it had legs, and then it was just seven stocks. And now, all of a sudden, it is powerful. And I think the momentum is continuing. You got the rate cycle, you got broadening out, we have wind at our sails, and this bull market should last at least another 12, maybe 18 months.”
On another front, strategists warn that future market gains will hinge on identifying sectors with strong earnings growth. As Artificial Intelligence becomes a key driver of market performance, attention will turn to its impact on profitability across various industries. UBS notes that October has historically been the most volatile month for tech stocks, with the Nasdaq 100 showing an average volatility of 26% in October over the past 40 years, compared to 22% in other months. Given the current geopolitical uncertainties and concerns around export controls, the bank anticipates increased volatility in tech stocks in the near term.
Our Methodology
To compile our list of the best stocks for high returns, we focused on some of the top companies in Insider Monkey’s database that have ana average analyst upside of at least 30%. These companies were then ranked based on their upside potential, in ascending order. We have also mentioned the number of hedge fund investors that held stakes within each company in the second quarter of 2024, out of a total of 912 hedge funds.
At Insider Monkey, we are obsessed with 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).
A close-up of a customer using the company’s e-commerce platform whilst shopping online.
PDD Holdings Inc. (NASDAQ:PDD)
Average Analyst Upside: 39.46%
Number of Hedge Fund Holders: 86
PDD Holdings Inc. (NASDAQ:PDD) is a global commerce conglomerate operating platforms like Pinduoduo and Temu. Pinduoduo offers a wide variety of products—from agricultural goods and apparel to electronics and personal care—while Temu serves as a digital marketplace connecting businesses with consumers.
The company posted robust financials, reporting total revenues of RMB 97 billion (RMB 1 ≈ US$0.14), reflecting an 86% year-over-year growth. GAAP operating profit grew significantly to RMB 32.6 billion, up from RMB 12.7 billion a year ago, while the company ended the quarter with a strong cash position of RMB 284.9 billion.
On October 9, CFRA adjusted its price target for PDD Holdings Inc. (NASDAQ:PDD), lowering it to $113 from $130 but maintaining a Buy rating. This revision reflects a reduced earnings valuation multiple, now at 8.0 times the projected 2025 EV/EBITDA, slightly below the industry peer median of 9.5 times. Despite the adjustment, PDD Holdings Inc. (NASDAQ:PDD) is projected to achieve 60% revenue growth in 2024, driven by its value-for-money focus appealing to cost-conscious consumers. In addition, growth is anticipated to moderate to 25% in 2025 as the company’s overseas expansion, currently spanning over 70 countries, stabilizes.
According to Insider Monkey’s Q2 data, hedge fund interest in PDD Holdings Inc. (NASDAQ:PDD) rose to 86 funds holding long positions, up from 76 the previous quarter. Rajiv Jain’s GQG Partners remains the largest shareholder, with 10.8 million shares valued at $1.43 billion.
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)
Overall PDD ranks 4th on our list of the best stocks to buy for high returns in 2024. While we acknowledge the potential of PDD as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you’re seeking an AI stock with even more promise than PDD and trading at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
