원문 보기
In our last two videos, we began exploring the portfolios of the world's best investors in search of hidden bargains. First we looked at Bill Ackman's bet on Amazon, and then Monish Pabrai's surprising move on AutoZone. And, honestly , both of these investments look pretty solid at today's prices . So, today we continue this journey.
This time we will dive into the portfolio of another legendary investor, Li Lu, often called the " Chinese Warren Buffett." And here's the most interesting thing. In his latest 13F report, Li Lu only purchased one share, and it was not a small purchase at all . It now makes up about 18% of his US portfolio, instantly becoming his second-largest holding, and that stock is Pinduoduo, or PDD Holdings, one of China's fastest-growing e- commerce giants.
So in this video, we'll analyze PDD Holdings, look at the financials, and of course, calculate the intrinsic value to see if it's worth buying today. If you like these videos, don't forget to hit the "like" and " subscribe" buttons. And now to the point. As I mentioned, PDD Holdings is one of China's fastest-growing e- commerce giants and the company behind Temu, a discount shopping app that is rapidly expanding overseas.
At its core, PDD connects buyers directly with manufacturers, offering extremely competitive prices through group purchases and promotions. This model has evolved into a huge ecosystem built around bargain shopping, attracting hundreds of millions of users. In the second quarter of 2025, the company reported revenue of $14.5 billion, up 7% year-over-year .
Most of this revenue came from online marketing services , which grew by 13%, while revenue from transactional services remained almost flat. But despite the revenue growth, operating profit fell 21% to about $3.6 billion , largely due to higher fulfillment , server and payment costs. As PDD continued to invest heavily in seller support and logistics, net income was $4.3 billion, down 4% from last year; This shows that the business remains profitable, despite the slowdown due to fierce competition.
Cash flow also shrank: operating cash flow fell to $3 billion, half the amount it had a year ago. But the fact is, the company still has a whopping $54 billion in cash and short-term investments, giving PDD enormous flexibility for expansion and new initiatives. Simply put, PDD is a profitable, cash-rich business that has the ability to aggressively reinvest for long-term growth.
At first glance, the company looks pretty solid. But let's take a closer look at their financial statements to see if there are any red flags. that are hiding beneath the surface. So, Pinduoduo Holdings shares are now trading at $128, up about 32% year-to-date. They are currently trading at a price-to- earnings ratio of 14 and a forward P/E of 12, which is quite low .
They have a very high return on invested capital—almost 25%, which indicates the effectiveness of their investments. And now the most interesting thing. Their net debt is negative and amounts to over $50 billion . This means that the company has enough cash to cover all of its debt and still have over $50 billion in free capital.
And this despite the fact that their market capitalization does not reach a trillion dollars, like Google. No, their market capitalization is only about 180 billion. That is, they actually have almost a third of their total capitalization in cash, which means the company's financial position is extremely strong.
This is a graph of Pinduoduo's revenue over the past 10 years. In 2016, their revenue was $72 million , and last year it grew to $54 billion. Friends, this is simply incredible growth. They increased their income by about 80 times in just 10 years. And this is a net profit indicator, and as you can see , the company was unprofitable until 2020.
Then in 2021, they became profitable and didn't stop there , reaching $15 billion in net profit in 2024. Now let's compare this to free cash flow. The picture looks quite similar, with free cash flow even outpacing revenue. Honestly, this is what we always want to see. Free cash flow is actually a better indicator of a company's financial health because net income is easier to manipulate.
This is a chart of their outstanding shares, and as you can see, up until 2021 they were issuing new shares quite aggressively, but over the past 3 years this process has slowed down. I don't really like that the number of shares outstanding has been increasing over the past four years. In my opinion, they have a huge amount of cash and could start returning that capital to investors through share buybacks, increasing shareholder value.
Here's what analysts predict for this company. Revenue is expected to grow from $54 billion last year to about $81 billion in 2029. Of course, this is not the same growth rate as before, but it is still about 10% annual growth. As for earnings per share, analysts expect it to grow at the same pace as revenue, increasing from $11.4 to $17.12.
They paint a better picture for free cash flow as they expect it to grow from $16.5 billion last year to about $34 billion in 2029, representing more than a doubling and about a 15% annual growth rate. So, if you look at Pinduoduo's financial performance, the picture looks very convincing. The stock trades at fairly low valuation multiples, especially given its stable profitability and rapid growth.
Additionally, the company has huge cash reserves, giving it great flexibility to expand and invest without significant risk. It has an excellent return on invested capital, which shows that PDD is not just growing quickly, but doing so efficiently. Both revenues and profits have shown exceptional growth over the past few years.
And while analysts expect the pace to slow down a bit, they still predict about 10% annual growth over the next 5 years. In short, PDD is a rare combination of strong growth, high profitability, and an extremely solid balance sheet. This is the kind of business that truly fits Leelu's value-driven approach.
Now let's do an intrinsic value calculation to see how much PDD Holdings is actually worth and whether it might be undervalued today. So, let's enter their ticker, which sounds like PDD. We will get the current price. And we will perform two calculations. One is based on earnings per share (EPS) and the other is based on free cash flow.
So, in terms of earnings per share, over the past 12 months it was $9.7. And, according to analysts, their EPS should grow by about 10% over the next 5 years. Let's reduce this figure a little and take 8% . And let's assume that the pace slows even more, to just 6% over the next 5 years. Let's add a standard expected return of 10%.
And for the terminal multiplier, we will take the market average value of 15. And let's see what the calculator will give. As you can see, for a 10% annualized return over the next decade, under these assumptions, you could pay $183 for Pinduoduo today, while it is trading at $131. This indicates that the company is undervalued.
Let 's try to increase the expected return to see what the company can actually bring today. Let's set it to 15%. And as you can see, even though my calculator says that at a 15% yield, the company is overvalued, the intrinsic value is actually almost exactly the same as the current market price. So, theoretically, you can expect about 15% returns over the next decade with these, in my opinion, fairly conservative assumptions.
I wouldn't call them pessimistic, but rather realistic or even restrained. Okay, now let's do the calculation from a free cash flow perspective. Over the past 12 months, PDD has generated about $ 8.85 of free cash flow per share. And, according to analysts, this figure should grow by approximately 15% over the next 5 years.
Let's be a little more conservative and put 13%. Let's assume that over the next 5 years the growth rate slows down even more and amounts to only 8%. Let's leave the expected return and terminal multiplier at 15. Let's see what these assumptions give us . As you can see , for a 15% annual return over the next decade under these assumptions, Pinduoduo looks quite undervalued today.
After all, you could pay about $164 per share of the company. So, let's crunch the numbers and see what real earnings we can expect from Pinduoduo over the next decade in terms of free cash flow. Let's set the indicator to 20%. For a 20% yield, it looks a bit overvalued, but still pretty close to a fair price.
So let's adjust to 18%. It seems that 18% is an annualized return that can be expected in terms of free cash flow under these assumptions. In my opinion, these assumptions are not overly optimistic. They are quite realistic. Overall, Pinduoduo looks like a very solid business. The financial indicators do not raise any concerns.
After calculating the intrinsic value, my estimates show that, based on earnings, the company can deliver about 15% annualized returns over the next decade. And from a free cash flow perspective, the picture looks even better, as the potential return could be closer to 20% per annum. Additionally, Pinduoduo holds a huge amount of cash—over $ 50 billion—giving it incredible financial flexibility.
Personally, I would like them to start returning more of that capital to shareholders, preferably through share buybacks or at least a dividend program. But even if they don't , it's not hard to see why Li Lu bought Pinduoduo and made it his second-largest asset. The fundamentals are excellent, the balance sheet is strong, and the long-term growth story still has plenty of promise.
To me, PDD looks like a high-quality, cash-flow generating business and perhaps one of the most interesting companies we've looked at in this series on super investors, so this stock makes up about 6% of my portfolio. If you haven't seen my previous two videos, where I analyzed Monish Pabrai's investment in Autoation or Bill Ackman's big bet on Amazon, you can find them on the screen or in the description below.
If you liked this analysis, please click the subscribe and like buttons, it will greatly help the development of my channel. And as always, friends, thanks for watching, I hope to see you in the next video. See you later.
Comments 0