11/23/24 - $pdd - Close to buying again... ~$100
11/23/24 :: VROCKSTAR :: 
PDD
Close to buying again... ~$100
- have traded this one around quite extensively, but it's always been a rental, because I'm never quite confident to own chinese stonks after getting the Brandon treatment on my Yandex shares (which eventually turned to
NBIS and i got to dump for btc)
- the VIE structures in china remain a concern, to be sure. but ironically i feel much more confident w Trumpo in whitehouse and this setup vs. Kamelo. his first term did similar to chinese stonks, sending them back "home" before there was less concern over time. to be sure China needs the US "less" than 4-8 years ago, but it remains important. also it's all one big club as my friend george carlin says and you and i r not in it (or if you are... godspeed). which is to say, it's all theater they r all friends and ultimately there are no real wars anymore (but i digress...)
- so back to pdd. conf call yielded what sounded like a sequel to the last result "growth moderating so we'll spend more"
- but when you look at google trends, a consumer still spending, and a cash strapped consumer... and i realize that google trends aren't the be-all-end-all but they help in the case of gauging brand/ retail interest. TEMU looks pretty legit (that's the marginal grower in the portfolio)
trends.google.com/trends/explore?date=today 5-y&q=temu,shein,shopee,aliexpress&hl=en
- so what's the right price for a chinese stock? always impossible to know short-term. but let's consider amazon is the gold standard. you get half the growth (conservatively bc it's probably 1/3) for 4-5x the PE multiple (of pdd) and you get 20% fcf yield on PDD (on their EV) vs. amzn at 3%.
- what about other chinese stocks i follow (typically only the top 3 at this stage b/c the others are exposed to the same risks and with more downside - bc they r not as passively owned) but probably w similar upside. so let's see about another big one, baba. multiple slightly higher on PE and fcf yield (which i'd point to as the guiding light when valuation metrics are already v low) as 11%. JD closer to 13% fcf yield. a smaller one...
VIPS (low to now growth) at closer to 30%. so PDD's ~20% yield looks pretty attractive for a co that should all-things-equal be the larger enterprise value company (vs. baba).
- what's the right way to play it? the million dollar question. into year-end, the stock might see a lot of vol to be sure. i'd hardly see US funds necking into this with size esp when they can take "china risk" with
TSM which is probably my favorite single name at the moment - i might write that up again. furthermore, tax loss season is upon us, so weak action on recent 
KWEB and all corresponding chinese stonks is going to force some rearranging by passive funds into year end as well. ultimately a bottom could be soon (could already be in), but given i see little reason for the stonk to retrace it's big (again) down move without additional sellers repositioning... the risk/reward looks balanced. as mentioned i am not a "must own china" exposure guy. and my TSM position (using leverage) at nearly 25% is big enough.
- so the way i'm personally playing it in my PA is further waiting. if it rips/ big catalyst, trump sucks the chinese star... i can hop back in. i'll add it to the top of my watchlist (at this pt i generally will be watchingPDD > 
BABA >
JD as canaries.. the others i'll look again with detail if/when the bellwethers run).
- keep an eye on the gap from late '24 as well. market makers have a funny way of dotting these i's and crossing these t's. low 80s would be a good entry.
- one more thing. i'm probably going to use medium-term leverage if we go lower. why? because i don't want to tie up a ton of notional cash in chinese names that could take time for catalyst to play out, but are explosive to the upside if/when. furthermore, if something whacky happens, i'd rather take the smaller L then have to cut or be cut off in my account with a zero. i ascribe a small scenario of the "yandex" style event, but would want to build some optionality for myself if/does happen, including ability to size up the calls with a longer dated exposure. remember - the main objective is to not lose money and to set ourselves up in the way where we can maximize upside to downside. i like calls on the chinese names when duty calls.
- if you've stuck with me on this long one. i appreciate you (i always do). have been traveling the last week and missed some action, so i'm here on a Saturday reviewing some buckets of names that i've been meaning to check in on (like China).
be blessed,
V
PDDClose to buying again... ~$100
- have traded this one around quite extensively, but it's always been a rental, because I'm never quite confident to own chinese stonks after getting the Brandon treatment on my Yandex shares (which eventually turned to
NBIS and i got to dump for btc)- the VIE structures in china remain a concern, to be sure. but ironically i feel much more confident w Trumpo in whitehouse and this setup vs. Kamelo. his first term did similar to chinese stonks, sending them back "home" before there was less concern over time. to be sure China needs the US "less" than 4-8 years ago, but it remains important. also it's all one big club as my friend george carlin says and you and i r not in it (or if you are... godspeed). which is to say, it's all theater they r all friends and ultimately there are no real wars anymore (but i digress...)
- so back to pdd. conf call yielded what sounded like a sequel to the last result "growth moderating so we'll spend more"
- but when you look at google trends, a consumer still spending, and a cash strapped consumer... and i realize that google trends aren't the be-all-end-all but they help in the case of gauging brand/ retail interest. TEMU looks pretty legit (that's the marginal grower in the portfolio)
trends.google.com/trends/explore?date=today 5-y&q=temu,shein,shopee,aliexpress&hl=en
- so what's the right price for a chinese stock? always impossible to know short-term. but let's consider amazon is the gold standard. you get half the growth (conservatively bc it's probably 1/3) for 4-5x the PE multiple (of pdd) and you get 20% fcf yield on PDD (on their EV) vs. amzn at 3%.
- what about other chinese stocks i follow (typically only the top 3 at this stage b/c the others are exposed to the same risks and with more downside - bc they r not as passively owned) but probably w similar upside. so let's see about another big one, baba. multiple slightly higher on PE and fcf yield (which i'd point to as the guiding light when valuation metrics are already v low) as 11%. JD closer to 13% fcf yield. a smaller one...
VIPS (low to now growth) at closer to 30%. so PDD's ~20% yield looks pretty attractive for a co that should all-things-equal be the larger enterprise value company (vs. baba).- what's the right way to play it? the million dollar question. into year-end, the stock might see a lot of vol to be sure. i'd hardly see US funds necking into this with size esp when they can take "china risk" with
TSM which is probably my favorite single name at the moment - i might write that up again. furthermore, tax loss season is upon us, so weak action on recent KWEB and all corresponding chinese stonks is going to force some rearranging by passive funds into year end as well. ultimately a bottom could be soon (could already be in), but given i see little reason for the stonk to retrace it's big (again) down move without additional sellers repositioning... the risk/reward looks balanced. as mentioned i am not a "must own china" exposure guy. and my TSM position (using leverage) at nearly 25% is big enough.- so the way i'm personally playing it in my PA is further waiting. if it rips/ big catalyst, trump sucks the chinese star... i can hop back in. i'll add it to the top of my watchlist (at this pt i generally will be watching
PDD > BABA >JD as canaries.. the others i'll look again with detail if/when the bellwethers run).- keep an eye on the gap from late '24 as well. market makers have a funny way of dotting these i's and crossing these t's. low 80s would be a good entry.
- one more thing. i'm probably going to use medium-term leverage if we go lower. why? because i don't want to tie up a ton of notional cash in chinese names that could take time for catalyst to play out, but are explosive to the upside if/when. furthermore, if something whacky happens, i'd rather take the smaller L then have to cut or be cut off in my account with a zero. i ascribe a small scenario of the "yandex" style event, but would want to build some optionality for myself if/does happen, including ability to size up the calls with a longer dated exposure. remember - the main objective is to not lose money and to set ourselves up in the way where we can maximize upside to downside. i like calls on the chinese names when duty calls.
- if you've stuck with me on this long one. i appreciate you (i always do). have been traveling the last week and missed some action, so i'm here on a Saturday reviewing some buckets of names that i've been meaning to check in on (like China).
be blessed,
V
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