We recently published a list of the 10 Cheap Internet Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where JD.com, Inc. (NASDAQ:JD) stands against the other cheap internet stocks to buy according to hedge funds.

Would March See a Pickup in Retail?

On March 6, Jan Kniffen, CEO of J Rogers Kniffen, appeared on CNBC’s ‘Squawk on the Street’ to discuss his outlook on retail. Weaving several threads of news in the retail space, he said that the fourth quarter was great despite an awful January and February due to the weather. However, the market is going to see a pickup in March as the calendar inches closer to Easter because even in the otherwise horrible month of February, the market saw a good Valentine’s Day.

He believed that March would see a pickup because the consumer still feels healthy, even if they are nervous. Spending has been pretty good on everything other than weather-related items, but the traffic has been slow. Kniffen believed that this trend is weather-related as well. He said that he isn’t too concerned yet, but while the retail numbers today may not make one nervous, tomorrow’s numbers may have the opposite effect. According to Kniffen, retailers are only seeing a little weakness, and that’s all weather-related.

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What Could Trump’s Tariffs Mean for the Retail Industry

Talking about the potential effects of tariffs on retailers, he was of the view that power and negotiating skills make up the necessary concoction to deal with the scenario. Companies with better logistics teams, experience with dealing with tariffs strategically, and a healthy position in terms of balance sheet are more likely to do well. Therefore, companies in the sector that are well-financed, boast great teams, and are executing flawlessly will do better than those struggling with dealing with tariffs. While Kniffen said that he couldn’t claim he isn’t worried about the tariffs, he isn’t terrified of them either, as the market knows how to deal with them.

The real question he posed was whether all that the market gets is 10% to 20% in China or whether it would really get 25% in both Canada and Mexico. In the second case, the whole economy gets dislocated, the consumer gets nervous, and everyone is terrified that they will quit spending and the market may go into a consumer-led recession.

However, if the tariffs were imposed only on China, the situation might be different. China has a significant export economy and would have to absorb a big chunk of the tariffs. It did so last time as well and is likely to do the same this time as well. The market will then also see substitution, trade down, and all the stuff we see when the consumer has to deal with it. The retail market will react to all that, and the big and strong members will likely react better.

Our Methodology

We sifted through stock screeners, online rankings, and ETFs to compile a list of internet stocks with forward P/E less than 15, including stocks from the internet retail and internet content & information sectors. We then selected the top 10 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.

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).

JD.com, Inc. (NASDAQ:JD)

Forward P/E: 9.12

Number of Hedge Fund Holders: 78

JD.com, Inc. (NASDAQ:JD) is an e-commerce company that deals with online retail and online marketplace through its retail website and mobile application. Its operations are divided into four segments: JD Retail, JD Logistics, Dada, and New Businesses segment. The JD Retail segment is engaged in online retail, marketing services, and online marketplace in China, while the JD Logistics segment covers internal and external logistics businesses. The Dada segment operates as a local on-demand delivery and retail platform in China. The New Businesses segment, in contrast, manages JD Property, Jingxi, and overseas businesses.

The company is expanding its JD Logistics segment globally, as it is a significant component of JD.com, Inc. (NASDAQ:JD)’s overall success. It is doubling its warehouse capacity by 2025 and is focusing investments on AI and automation to boost efficiency and streamline customer experience. These technologies include 5G-powered smart logistics parks and intelligent warehousing systems.

In addition to this segment, JD.com, Inc. (NASDAQ:JD) has strong overall operations. For fiscal Q4 2024, the company reported net revenues of around $147.5 billion, reflecting a 13.4% increase from fiscal Q4 2023. Net revenues for the full year 2024 reached $158.8 billion, an increase of 6.8% from the full year of 2023.

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 2nd on our list of the cheap internet stocks to buy according to hedge funds. While we acknowledge the potential of JD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher 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.

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Disclosure: None. This article is originally published at Insider Monkey.