Looking for good growth ideas to buy? Here’s why JD.Com Inc (NASDAQ: JD) and Sea Ltd (NYSE: SE) might fit the bill. –
Growth investing is a popular strategy that allows investors to amass outsized returns in the stock market.
For example, investors who had invested in Tencent Holdings Ltd (SEHK: 700) a decade ago would have grown their investment handsomely over that period.
In this article, I’ll explore two companies that not only have a proven track record of growing their business but also well-positioned to grow at high rates for the foreseeable future.
The first company here is JD.Com Inc (NASDAQ: JD) (SEHK: 9618). For those who are new to the company, JD.com is one of the leading e-commerce company in China.
It operates a first-party e-commerce business and also offers its platform to other online sellers. Moreover, it has also diversified into other business areas such as logistics, financing, offline retailing, and more.
JD has demonstrated a solid track record of growth. Here are some numbers to consider. From 2014- 2019, JD.com grew its active customers from 90.6 million to 362.0 million.
Similarly, gross merchandise value grew from RMB 304 billion (US$44.6 billion) to RMB 2.1 trillion. This resulted in net revenue growing from RMB 115 billion to RMB 577 billion.
Despite its prior success, JD is well-positioned to sustain the growth of its core e-commerce business thanks to its integrated business model, which allows it to provide good service to its customers.
Also, its newer businesses such as logistics, fintech, and healthcare are all growing at breathtaking speed and will likely continue to do so in the future.
In its latest earnings report, JD reported that these new ventures grew revenue by 51% year-on-year, which is higher compared to the company-wide revenue growth rate of 34%.
2. Sea Ltd
Sea Ltd (NYSE: SE) is a technology company based out of Singapore. The company operates mainly in Southeast Asia, Taiwan, and the South America markets.
Its business activities span across three main areas – online gaming, e-commerce, and digital financial services.
Founded as a gaming company, Sea Ltd has grown into a dominant technology player with significant market share in the online gaming and e-commerce businesses in the Asia Pacific, Taiwan, and South America.
Many reasons have contributed towards Sea Ltd’s success, which includes having a localised strategy for the different markets, strong backup from strategic investors like Tencent Holdings Ltd (SEHK: 700), and a highly effective talent management programme.
Sea’s strong performance is evident in its financial performance – revenue grew by 645% between 2015 and 2019.
It continued to deliver solid performance in the recent quarter amid the Covid-19 pandemic, with adjusted revenue growing by 93.4% year-on-year to US$1.3 billion.
Despite its historical outperformance, I believe Sea Ltd’s best days lie ahead as it continues to ride on multiple tailwinds, which include GDP growth, an increase in e-commerce penetration, and more.
Garena, Sea Ltd’s gaming company, will continue to grow as it monetises its 500 million quarterly active users (QAUs).
Similarly, Sea Ltd’s market-leading e-commerce arm (Shopee) will continue to ride on the growth of the e-commerce industry in Asia Pacific, Taiwan, and Brazil.
Also worth mentioning here is Sea Ltd’s digital finance arm – Sea Money – which aspires to become the Ant Group in its local markets by capitalising on the users of Garena and Shopee.
The global stock market has recently corrected amid the dire economic outlook thanks to the Covid-19 virus and the ongoing trade war between China and the US.
Still, such a correction might be beneficial to long-term growth investors since they can acquire growth stocks at a better valuation.
I will be keeping a close eye on both JD and Sea Ltd considering their strong growth track records, as well as their prospects in the foreseeable future.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.
The Motley Fool Hong Kong Limited(www.fool.hk) 2020