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
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
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