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So in this video we’re going to be talking about a stock jd calm it is a chinese e-commerce company a lot of people are keeping their eye on the stock because the price just keeps on falling and falling it’s a stock i am personally invested in and so what i’m going to be doing here is doing a brief you know explanation of what this company is going over their price
History and then basically looking at the bullish perspective on the stock as to why you would possibly be investing in it and also the bearish perspective as to why people are staying away from the stock and saying i want nothing to do with it so first of all i am a shareholder of jd comm but the thing is and this is something i said exactly to the viewers over in
Stock radar is that i knew going into this that i was probably going to be down in the short-term so i ended up buying 95 shares at 3147 per share it was an investment of around $3,000 now the reason why i only invested $3,000 is because i’m looking to build up roughly a ten thousand dollar investment in jd comm over the course of the next six months and so i knew
That i would probably need to average down to lower my cost basis so i didn’t go all in at once i would not invest ten thousand dollars basically going all in because that removes your ability to average down and lower your cost basis so jd comm is 100% a falling knife at this point in time they keep hitting new 52 we closed it is very similar to another investment
Of mine ge which was also a falling knife but this is exactly what happens when you’re investing in companies that are going down that are basically hitting 52 we close this is one of my favorite times to invest in companies i would much rather invest in a company hitting a 52-week low not a 52-week high that’s just my personal preference but one of the risks that
You run is that you could be catching a falling knife and you could end up down 15 20 25 percent on that stock in the short term and you have to have the ability to see the long term perspective or the long term outlook and not get shaken out of your position early but the one thing i will say is if you are going to be in investing in a stock that is at or nearing
A 52-week low you should basically take a small initial position in that stock and then average down and accumulate a meaningful position over a long period of time because odds are that price is going to continue to fall okay but first of all let’s go ahead and cover a brief history here of jd comm and what has happened with this stock so jd calm went public back
In may of 2014 at an ipo price of $19 of 2015 this stock was trading at a high of about thirty seven ninety five per share so early investors had a nice return there from this stock now after that point from june 2015 to one year later in june of 2016 this stock went from thirty seven ninety five a share down to about twenty dollars per share just about a dollar
Over that ipo price meaning that basically anybody who had invested in that stock had held it for those two years that obliterated all their returns and they were back at a break-even and this is not a stock that’s paying any kind of dividends to shareholders or anything like that so basically that was dead money for those two years for early investors in jd comm
After that the stock went on a tear from june of 2016 to january of 2018 the stock went from 20 dollars and 13 cents per share to 50 dollars in 68 cents a share in january of 2018 and then in january of 2018 that is when this trade war fear began to enter the market that is when we began to enter this chinese bear market and now as of september 26 the stock trades
At about 25 dollars per share so this stock is down 50 percent from what it was back in january of 2018 and it’s about six dollars over that initial ipo price from multiple years ago so this stock is trading at a very low price compared to its price history but again that is not in it of itself a reason to be investing in this stock anyways let’s go ahead now and
Cover a little bit more of a background about what jd com is and the business they’re involved with so this is the second largest e-commerce company in china behind alibaba alibaba being another company i am invested in i’m very bullish on e-commerce as a whole and i feel that these chinese e-commerce companies are trading at a much more reasonable valuation
Then you know american companies like amazon i would much rather have my money in alibaba and jvcom than to have it in amazon at this point in time but that is just my personal preference so jd sells goods directly to customers just like amazon a lot of people have misstated and said that alibaba is the chinese amazon and this really is not correct there’s a big
Difference here between what alibaba is doing and what jd kaam is doing and this really comes down to two things the logistics and the fulfillment so basically if i were to make a comparison here alibaba is more like the chinese ebay they are a platform where people can go on there and sell their goods but those people are going to be shipping those goods to their
Customers whereas jd comm is what i would really call the chinese amazon but they’re a little bit different than amazon too because they’re actually the courier as well they deliver most of the packages that they are shipping so not only are they fulfilling that not only are they you know packaging the goods they also handle the logistics and deliver them to the
Customers and that is one of the main differences here between the united states and china is that in the united states we have major courrier services we have the you know ups us postal service we have fedex but in china there are no major courier services and so this is why jd made this decision to not only you know fulfill orders and handle also the logistics as
Well in the delivery of those packages so basically in a nutshell here jd comm sells goods directly to consumers like amazon jd owns both the fulfillment network and the logistics network and they’re delivering most of their packages whereas alibaba is more or less just a fulfillment network they’re never touching the products jvcom they’re touching the products
They’re fulfilling the orders alibaba doesn’t touch any products and that is the key difference between these two companies so that is why i would call jd the chinese amazon and i would call alibaba the chinese ebay and that’s why i’m invested in both these stocks a lot of people would say well you know why are you investing in two companies that are in direct
Competition with each other i don’t believe they are we have room for both ebay and amazon here in the united states and both of these companies are doing very well i believe there is also room for both a jd comm and an ali baba in china so as a result of these differing business models jd has an expensive business model it’s very expensive to have the fulfillment
Network and the logistics network and all these trucks out delivering packages but as a result they have better quality control and they have lower margins they have much better quality control over these products because they’re actually touching them actually shipping them to customers now alibaba on the other hand they have a very inexpensive business they’re
Not actually touching any packages as a result it is a marketplace similar to ebay the quality control is lower but the margins are significantly higher so a lot of people incorrectly compare the margins of jd comm to alibaba and they don’t understand the major differences between these two businesses that’s the same as comparing the margins of ebay to the margins
Of amazon they are two completely different business models okay so that’s a bit of a background there on jd comm now i’m going to start with the bullish thesis on this stock and why i am personally invested in jd comm and number one the first reason is because of the strategic partnerships or the investments from some of these large companies there’s a lot of huge
Companies out there that are either partnering up with jd comm or investing in jd comm this could be a very long video if we wanted it to be but if you guys are interested just look this up look up what the actual partnership agreements or the investments are but jd comm has either a partnership with or investments from google from baidu from walmart from $0.10 and
Then another chinese company iqi why i not a hundred percent sure in the pronunciation but it’s another stock that a lot of people are talking about these days and a lot of people are interested in but they have some very very crucial partnerships with some very large companies and there are a lot of very reputable companies that are either part with jd comm when
They’re investing in this company number two this company is still seeing explosive growth in the most recent quarterly earnings report they showed net revenue growth of 31.2% quarter-over-quarter and annual active customer accounts growth of 21.5 percent quarter-over-quarter so this is still an explosive growth stock but this is not being reflected in the share
Price i always look to see a deviation here where the company is performing very well they’re seeing explosive growth but that is actually not being reflected in the share price that is when you can unearth hidden a value in the market and as of what’s going on right now this is a stock that’s being dragged down by the overall market and this bear market we’re
Seeing in china and then number three my third reason for investing in this company is because of this low valuation like i said i would much rather have my money in one of these chinese e-commerce companies like alibaba or jd than i would in amazon and i was an amazon shareholder in the past but i just want to show you guys here a bit of a comparison between the
Valuation of jd and the valuation of amazon and it’s not as simple as looking at a p/e ratio because this is not a company that i believe is even profitable at this point in time because of all the capital investment required to basically get this business off the ground in terms of the fulfillment and the logistics networks and you know all of that investment but
In 2017 jd did fifty five point seven billion dollars of revenue while amazon did a hundred seventy seven point nine billion in revenues so it’s really unbelievable to me to see that you know jd comm did roughly you know about a third of what amazon did in 2017 in terms of revenue when you compare the difference in the valuation of these two companies so jd comm
Has a market capitalization currently of thirty six point three billion which means they are trading at zero point six five times there are 2017 revenue amazon on the other hand is trading at a market capitalization of nine hundred sixty nine billion or a valuation of five point four times their 2017 revenue that right there is my main reason for being invested
In you know a chinese e-commerce company / amazon and guys there are so many other reasons to be bullish / jvcom there’s a lot of exciting things they are doing and they are very similar to amazon with their business model with offering you know something very similar to amazon prime they’re exploring drone delivery they’re you know including automation in their
Whole process in trying to leverage technology so i really recommend it this is a company that’s on your radar do some research on these strategic partnerships with you know google baidu walmart in understand what it is that’s really going on with this company but anyways now i want to move over and talk about the bearish thesis here why you would say i’m not going
To touch the stock with a 10-foot pole and number one on this list has to be bad management the ceo richard liu was just recently in the news in september over some kind of sexual misconduct scandal he was arrested while he was here in the united states and the stock took a major plummet just on that news and unfortunately this is not the first time there have
Been headlines involving this ceo and something related to this kind of nonsense going on and so when you have a ceo who’s a loose cannon this can be a major hiccup with this stock here he could go out there and do something stupid here you get arrested again and that right there is a major mark against this stock in my opinion is that the ceo is a bit of a loose
Cannon based on what has happened in the past and recently here as of just september another reason that a lot of people are bearish and not interested in chinese stocks overall or jvcom is the fact that we are in a chinese bear market right now we have seen a massive correction take place with these chinese stocks and this is primarily due to the trade tensions
Between the united states and china and there is no real sign right now of anything getting resolved at this point in time and so a lot of people are saying we don’t know what’s going to happen we have no idea what is going to happen with these companies in terms of tariffs and what’s gonna go on with this so we want nothing to do with it and frankly i don’t blame
You because all we’re going to be seeing until this is resolved is just immense amounts of volatility and confusion and like i said if you guys are not experienced with investing if you’re not comfortable with this volatility if you’re not comfortable buying a stock seeing it go down 10 15 20 % and averaging down and accumulating a position over time then this
Probably isn’t a stock that should be on your radar but if you are interested in building a meaningful position and taking advantage of this sale here in chinese stocks then this might be a stock that you could put on your radar and keep track of but for that reason because of the trade tensions between us and china a lot of people have sold out of their chinese
Stocks and they want nothing to do with them and then third and finally the biggest argument that i hear against jd comm is that alibaba is going to beat them by having better margins and lower operating expenses but again this is mostly from people who don’t understand the differences between the business model of alibaba and jd comm and i believe there’s room
For both of these companies just as we have ebay and amazon here in the united states and when you compare the margins of alibaba – jd comm it doesn’t make sense it’s comparing to companies that have completely different business models and just to give you guys an example of this in 2017 ebay had operating margins of 24% those are fantastic margins because it’s
A very lean business ebay’s dynel far as i know ebay is not touching any packages themselves it’s third-party sellers who go on ebay platform and they sell for that platform and ebay takes a cut or a commission on that sale they’re not actually you know touching any of these packages or items so that is a great business because it’s super lean and the margins are
Going to be higher amazon on the other hand in 2017 had an operating margin of two percent compared to a twenty four percent margin from ebay so it’s not really fair to compare the margins of alibaba to jd it would be similar to trying to compare the margins of an ebay to an amazon they’re just drastically different companies and as i’ve said i believe there is
Room for both of these companies but anyways guys that is my opinion i’m jd comm like i said i am a shareholder in this company i’m looking to build up a position of around $10,000 over the next six months but again if you are interested in the stock make sure you do more research understand what this company is involved with what they’re doing and you know you
Always want to make sure you’re doing more research above and beyond what you see in youtube videos that is just common sense but anyways guys thank you for watching this video i hope you enjoyed it i’d love to hear your thoughts about jd alibaba any of these companies mentioned down in the description below but thank you for watching and i will see you in the next video
Transcribed from video
I Will Be Buying $10,000 Worth Of JD.com Stock! 📈 (Is JD.com A Buy?) By Ryan Scribner
