Per Tom Gardner’s request, I wanted to look at JD.com in depth but I can’t say it any better than this article.
The article is about a year and a half old and JD has since sold off JD Finance but for the most part the same thesis is in tact. The big competitive advantage for JD is the vastness of its logistics infrastructure whereas Alibaba is just a middleman and it doesn’t actually own any inventory. JD.com is one of those businesses that is playing the long long game so I think it is right up Tom G’s alley.
Simple Bottom Line:
Alibaba is more like Ebay than Amazon, JD is the Amazon of China.
Here is an article I posted a while back.
When it comes to transaction volume, JD captured 24.7% of the business-to-consumer market share last year, No. 2 behind Alibaba (BABA). But JD beats Alibaba on a revenue basis. In the fourth quarter, JD’s revenue totaled $11.6 billion, while Alibaba’s top line came in at $7.7 billion.
JD is making big investments in logistics and fulfillment, and the company has been able to significantly ramp up the amount of orders filled per quarter. In the fourth quarter, total fulfilled orders increased 43% to 505.7 million.
And much like Amazon with its Alexa-enabled Echo devices, JD added voice shopping functionality to its DingDong A1 smart speakers in December.
What also sets JD apart is its reputation for delivering quality products. Alibaba has gotten into hot water in the past for allegedly selling counterfeit goods.
FYI, this comes from the IBD site, investors.com. They specialize in growth stocks following the CANSLIM method. There is a huge overlap between them and Rule Breakers and Stock Advisor. I strongly recommend checking out all the free content on the site for ideas, including “The New America” articles each week, here
I find it hard to believe that Tom and David don’t use this as one source of ideas.
I added JD.com to my portfolio back in September 2016. It’s now +20% (with a fair amount of that being quite recent due to some positive news announcements). I don’t think I can add more context than what’s above except to agree with the high-level comparison (JD =~ Amazon; Alibaba =~ eBay) and posit the probable outcomes based on that. Their infrastructure alone will give them power to do things that haven’t even been mentioned yet.
This is the first Chinese company I have invested in, and it could be the last. I know that at any moment some numb-nuts in the Chinese government can wake up and decide that all companies with a .com in their title are now required to funnel 75% of their profit directly to the government, or whatever. So for me it’s still a small position. I had intended for it to stay <1.5%, but it’s rolled past the 1% mark quickly, so I may have to make a decision soon: whether to add to a “winner” or trim back to table stakes because of the inherent risk.
If it wasn’t for the China element, I’d have probably 5% or more in JD.com…