Our Biggest Gainers & Losers of the Day in the $100,000 Build Portfolio

For the 26th August 2024:

Cover your eyes. Looks away.

One of my favourite stocks got caught up in a bloodbath. PDD lost nearly a third! of it’s market cap today & finished down 28% on the day.

So what happened? Is the market overreacting? Should I be dumping my shares too?!

Or….. should you be buying more? Let’s dig in.

PDD just released its Q2 2024 earnings report. Needless to say, it wasn’t exactly what the market was hoping for.

They didn’t quite hit the revenue targets that analysts were expecting. They reported $13.36 billion in sales, which is solid, but still shy of the $14 billion they were penciled in for. Can I also say that’s 85% year-on-year growth. Nearly double the revenue. And with today’s huge drop, share price is around what PDD was trading for a year ago… with 85% less revenue… can you see where I’m going with this?

Now revenue isn’t everything & management warned of slower growth going forward. Not the best news, but let's keep going.

One of PDD's biggest hurdles right now is tough competition from the big boys like Alibaba & JD.com. These companies are fighting back in the price wars & other strategies that could squeeze PDD’s margins. Not good.

On top of that, sellers on PDD's platform aren’t thrilled about the rising fees. There’s even been some protesting at Temu’s offices in China.

But here’s the thing - I would file all this under the “Challenges” category. Not “Deal Breakers”. Because let’s not forget, these challenges haven’t just appeared since they released their earnings report. They’ve been there the whole time & they’ve still grown revenue 85% year-on-year.

And PDD’s Transaction Services segment is growing like a weed. It’s more than tripled year-over-year! This part of the business is becoming more & more important as it makes up a bigger chunk of PDD’s overall revenue. Sure, merchants aren’t impressed with the higher fees, but if PDD can smooth things over & strike a better balance, this is a segment that has the potential to see solid growth over the long term.

If there’s any mystery, I used today to the buy the dip. And I got a whole bunch of dip.

PDD was about 0.5% of my portfolio. It now makes up about 2.5%

Yes, there are challenges ahead. Slowing growth, competitive pressures & the need to regain merchant trust. Let’s not open up the can of worms about the Chinese economy as a whole…

But PDD’s potential for strong, long-term growth is still very much on the table & that’s where the money is made. On buying potential before it’s realised.

If management can navigate these obstacles, which I think they can given the explosive growth they’ve already shown us, PDD should come out stronger on the other side.

There’s a 50% upside to recent highs & I’m not saying we’ll be there tomorrow, I’m just saying I think this is all a bit of an overreaction.

I’m OK with some short-term volatility & believe in PDD’s long-term strategy so would love to get an average buy price under $100. I’ll keep a close eye on how the merchant relationships are handled & if there’s any signs of folding to the competition but for now I’m a confident buyer.

A slight downer but no real compelling growers in the portfolio today. Exxon Mobil topped the list at 2% but nothing to dig into so I guess we’ll see what tomorrow brings!

That’s all! See you same time tomorrow 👋

P.S Hit reply & let me know what you thought of today’s newsletter. All feedback is welcomed ❤️