Is JD.Com Inc. (JD) the Most Undervalued Large Cap Stock to Buy Now?
We recently published a list of . In this article, we are going to take a look at where JD.Com Inc. (NASDAQ:JD) stands against other most undervalued large cap stocks to buy now.
On March 4, David Katz, Chief Investment Officer at Matrix Asset Advisors, joined 'The Exchange' on CNBC to share his perspective on the current state of the bull market and what February's mixed action and sector rotation might signal for the rest of the year. Katz acknowledged that while people might not want to hear it, the volatility seen in February is likely to persist throughout the year, with both upside and downside movements. He emphasized that this creates opportunities for investors but also necessitates caution. Katz highlighted several positive factors supporting the market, which included a strong economy and solid corporate performance. However, he expressed concerns about certain policies from the administration, such as tariffs, immigration, and the relationship with the Fed. While these issues have been largely ignored by the market so far, Katz warned that they could eventually lead to a 3-5% correction. Despite this, he remained optimistic about the economy's ability to navigate these challenges and recommended buying into market dips rather than chasing rallies.
To support his sentiment, Katz pointed to companies that have already experienced significant corrections and are positioned to perform well regardless of broader market movements. He highlighted their strong fundamentals, attractive valuations (most trading at under 13-14 times earnings), and good outlooks. He also noted that last year's market leaders have slowed significantly, while sectors that underperformed are beginning to show meaningful improvement, a trend he expects to continue. This sector rotation suggests that investors should be prepared to adapt their strategies as different sectors gain momentum throughout the year.
We used the Finviz stock screener to compile a list of the top stocks trading between $10 billion and $200 billion. We then selected stocks with a forward P/E ratio under 15 and made a list of 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey's database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A wide and imposing view of a supply chain distribution center, illustrating the company's technology capabilities.
Forward Price-to-Earnings Ratio as of March 4: 9.75
Number of Hedge Fund Holders: 78
JD.Com Inc. (NASDAQ:JD) is a Chinese supply chain-based technology and service provider. It offers products like electronics, home appliances, and general merchandise. It also offers online marketplace services, marketing solutions, and omni-channel capabilities. Beyond its core retail operations, it develops and manages logistics infrastructure, provides integrated technology and supply chain solutions, and offers online healthcare services.
JD Logistics is a key component of the company's overall success and is building a strong logistics network. In Q3 2024, the segment's revenue grew by 7% year-over-year, with internal revenue up 8% and external revenue up 6%. This growth shows the effectiveness of JD Logistics' efforts to expand its reach and service both JD.Com Inc. (NASDAQ:JD) and external clients. The company improved its profitability in Q3 through this segment. Non-GAAP operating income saw a 624% year-over-year increase.
JD Logistics is expanding globally with doubled warehouse capacity anticipated by 2025. It's investing heavily in smart technologies like AI and automation to enhance efficiency and customer experience. These include such intelligent warehousing systems and 5G-powered smart logistics parks.
Ariel Global Fund is highly positive on the company due to its strong performance driven by Chinese stimulus, improved consumer spending, successful diversification strategies, and the ability to capitalize on growth opportunities like home appliance trade-in programs. It stated the following regarding JD.Com Inc. (NASDAQ:JD) in its Q3 2024 investor letter:
'China-based E-commerce company, JD.com, Inc. (NASDAQ:JD) was the top contributor in the quarter as the People's Bank of China's (PBOC) comprehensive stimulus measures bolstered investor confidence in the Chinese economy. The improving economic sentiment is fueling consumer spending which benefits the company's retail operations. Additionally, the company's strategic decision to diversify general merchandise product offerings, expand its third-party marketplace business and monetize advertising streams has contributed to consecutive quarterly earnings beats. JD.com is also poised to capitalize on the home appliance trade-in program, which is one of its largest product categories. Given the favorable market environment, the company's strategic positioning and supply chain efficiency improvements, we continue to like its long-term growth prospects.'
Overall, JD ranks 9th on our list of most undervalued large cap stocks to buy now. While we acknowledge the growth potential of JD as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
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