Dingdong stock a top pick for this leading Asia Fund PM
Launched in Shanghai in 2017, Chinese online grocery retailer Dingdong (NYSE: DDL) has had a rapid rise to prominence.
In a nation where almost half of the grocery industry remains dominated by traditional markets, Dingdong is one of a handful of internet business at the forefront of the modernization of China’s grocery industry. Others include JD.com (NASDAQ: JD) and Pinduoduo (NASDAQ: PDD).
JD, Pinduoduo and Dingdong’s stock prices all hit record highs in 2021, but they’ve since plunged amid concerns about regulation and China’s economy.
But for one leading fund manager, Dingdong stock, which has fallen around 80% since its November 2021 peak, now stands out as a compelling investment opportunity.
Cameron Roberston, an Asia Fund portfolio manager at Platinum Asset Management – a value-oriented investment firm with $14 billion under management – says he analyzed Dingdong when the company first listed on the NYSE in July 2021.
Then, he found the valuation too high, but now he believes the time is right to invest.
“Since launching less than five years ago, consumers have embraced their (Dingdong) offering with vigour. The business is now at a run rate of $3.5 billion in annual sales. Last quarter Ding Dong handled over 100 million orders,” said Robertson.
“They’ve been investing aggressively to make sure that their proposition is compelling. This includes investing in upstream production and sourcing. They’ve helped producers with agricultural production processes and this has given Ding Dong control over their supply chain, ensuring that when products are delivered to the end consumer they are fresher.
“Ding Dong’s investment hasn’t just been in the back end processes through, they’ve also been rolling out frontline fulfilment centers or mini-warehouses. They’re rolled out more than 1400 of these across 29 cities in China.”
Robertson says while Dingdong stock listed on the NYSE has been aggressively sold down over the past few months months, the company has “proven out” its business model, in which is promises to deliver fresh groceries to customers in under 30 minutes.
“Initially when Dingdong was listed we took a look and the company was seen as a market darling attracting a generous valuation. But after that the company was subsequently marked down and shares fell significantly, providing us an opportunity,” he said.
“Now we’re seeing the economics of the business being proven out, in the most mature markets – cities like Shanghai which is showing great progress.
“This gives us comfort to believe that as those economics are proven out, the consumer proposition is increasing recognised, investors will be handsomely rewarded as this company continues to build out the future of China’s grocery industry.”