Cathie Woods Goes Bargain Shopping. 3 Stocks She Just Bought (JD)

Maybe it's time to get in on this e-commerce leader? 

Brian Withers (JD): JD.com seems to be a Cathie Woods’ favorite. Not surprisingly, it’s the second-largest holding in the Autonomous Technology & Robotics ETF, as the leading Chinese retailer depends on robotics technology for warehousing functions and even last-mile delivery. But this technology-first company is also a holding in three other of ARK’s ETF. Let’s look at why Woods’ has added more shares in the last several weeks.

First, the stock is down more than 30% off its high, and not because the business is doing poorly. In fact, the company just put up stellar Q1 results. Second, the ARK funds have owned shares of JD since mid-2017, and in Q1, the funds added considerably to its position, more than doubling the share count over the quarter. It’s likely these buys over the course of this year and the recent purchases show that they are excited about the company's performance, long-term prospects, and valuation.

Let’s take a look at how its most recent quarter fared. Not surprisingly, the top line decreased sequentially from the holiday quarter, but managed to beat analysts’ expectations and post a 39% year-over-year increase. The company income from operations remains in the black, but still runs thin margins as its investing in growth. Lastly and probably most exciting to investors is the platform continues to attract customers at a rapid pace, even with hundreds of millions already on the platform. 

Data source: Company earnings release.

Looking ahead, the company is deepening its reach into rural China. Over the past twelve months over 80% of its 112 million new active customers have come from lower-tier markets. Additionally, the company is expanding its footprint to better serve those regions. With its more than 1,000 warehouses across the region, its logistics team can now reach almost the entire country with rapid delivery services. Lastly, it’s newly formed business group, Jingxi, is set up to serve price-sensitive customers in lower-tier regions. In its first quarter of operation, Jungxi served 17 provinces with its e-commerce operations.

There’s lots to like about this leading Chinese e-commerce retailer’s business. Additionally, its stock trades at reasonable valuations. Compared to Sea Limited’s lofty 25 price-to-sales ratio, MercadoLibre’s 16, JD shares are valued at a 1 P/S ratio. Additionally, it has a P/E ratio of a cool 15, whereas its Latin American and Southeast Asian counterparts don’t have earnings to record a P/E ratio.

It’s no wonder that the Cathie Woods and the ARK investment team are adding to their position as this growth stock is trading at a discount to its recent high. Maybe it's time you did the same?