Welcome to part 4 of our 7-part series analyzing Michael Burry’s latest additions to Scion Asset Management. We’ve already unpacked BKI, COHR, and BABA – three stocks that make up 41% of the portfolio. But today, we’re going to determine whether you should fade or follow Burry’s decision to take a long position in JD.com.
The famed investor recently purchased 75,000 shares of the Chinese e-commerce behemoth. This move makes up 9% of his portfolio. And this particular position is a bit of a head-scratcher, as shares of the company are down nearly 30% in the last 3 month period. After the company’s underwhelming earnings report and a cautious outlook for the road ahead, it appears this trend isn’t going to turn around anytime soon either.
JD witnessed a sharp drop in year-end revenue growth in comparison to the same period last year. This company is facing many of the same challenges as BABA – another foreign e-commerce group that Burry is heavily invested in. While China’s strict COVID-19 control measures are loosening, a new struggle with weakening consumer sentiment and demand is forming.
In the months to come, it’s been said that China will experience a consumer rebound – but JD remained cautious in its outlook. The company isn’t expecting demand to return to normal levels until the 2nd half of the year, suggesting investors are going to need a strong stomach for at least a few more months.
Now – with that said, is it worth buying into JD.com at the low price point it sits at today? Below, we’re going to analyze the stock through the tried-and-true VectorVest stock analyzer software to help you determine what your next move should be.
Despite Fair Upside Potential and Safety, the Timing is Very Poor for JD
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You’re given all the insights you need to trade at a high rate of success in just three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on its own scale of 0.00-2.00, with 1.00 being the average. And, based on the overall VST rating for a stock, VectorVest gives investors a clear buy, sell, or hold recommendation. As for JD, here’s what you need to know…
- Fair Upside Potential: In comparing JD’s 3-year price appreciation potential to AAA corporate bond rates and risk, VectorVest deems the upside potential to be fair - with an RV rating of 0.98. While this is just below the average, the stock is overvalued as it stands today. The current value is just $20.61/share.
- Fair Safety: In terms of risk, JD is a fairly safe stock - as evidenced by the RS rating of 0.98. This rating is calculated by analyzing the company’s financial consistency and predictability, debt-to-equity ratio, and business longevity.
- Very Poor Timing: The real issue for JD investors is the negative price trend pushing this stock lower and lower. The RT rating of 0.36 is very poor, and suggests the stock may not have reached its low point yet. The rating is calculated based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
NThe overall VST rating for JD is 0.80 - which is poor. What does that mean for an investor like you who is interested in following Burry’s moves? Should you buy JD and wait patiently for things to turn around, or should you wait for the storm to clear? Get a clear buy, sell, or hold recommendation with a free stock analysis today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. Right now, JD has fair upside potential and safety, but very poor timing pushing the price lower and lower.
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