Pinduoduo Inc. – (PDD) Surpasses Monthly Active Users of Alibaba (BABA)
Pinduoduo Inc. is the largest agriculture-focused technology platform in China. It has created a platform that connects farmers and distributors with consumers directly through its interactive shopping experience. Millions of farmers supply their fruits and vegetables to Pinduoduo users.
“Between Pinduoduo’s business model and socially-conscious goals, Ark Invest appears to see a bright future for the company. In four transactions at the end of August, Ark added almost 208,000 shares to ARKF.
From ARK: “We believe that Pinduoduo’s important role in modernizing China’s agriculture industry and alleviating poverty across Tier 2 and 3 cities is improving its relationship with the Chinese government relative to its competition,” Ark wrote in a note.
With global demand for food on the rise, it makes sense that Wood would expect an agricultural play to pay off over the long run. But Ark’s investment in Pinduoduo is already paying off: The company’s stock is up almost 16% since Aug. 3.”
What is the Trade?
Picking up shares at what we believe to be a discount. Chinese stocks have taken a beating lately, begging the question: should we be greedy when others are fearful? There is always risk in investing, in my opinion many big name Chinese stocks are currently trading at discounts. But regulatory risk persists!
- PDD appears undervalued, with an intrinsic value of $199/share
- Currently trading at $100/share
- This can be a buy and hold or buy and hold for the medium term as the market realizes the intrinsic value of this company. You could also take profits along the way.
- Rationale: PDD business has room for growth. PDD has competitive advantages. China is the world’s largest e-commerce market. Not without risk as, do your due diligence, regulatory risk persists.
- Assumption: Neutral
- Timeframe: 4 months to years
- Another way to gain exposure to emerging markets like China is through EEM, iShares Emerging Markets ETF. Performance has been mediocre, but some are saying these ETF’s are ready to post some solid returns. weigh the risk and rewards. For me, emerging markets /China have a 10-15% weight in the overall portfolio.