Why JD.com is 'best positioned' to capture China's recovery

JD.com (JD) stock plummeted over 50% year-to-date despite China's economic recovery and rising online retail sales. However, Anthony Sassine, senior investment strategist at Kraneshare, argues that JD may be a good investment and not just a "value trap." Sassine believes JD is "one of the highest quality e-commerce players," and that the main reason for JD's decline is its focus on big brands and appliances while China's recovering economy is not spurring that kind of spending.

"I think JD is best-positioned to kind of capture the recovery," Sassine tells Yahoo Finance, adding: "... because you have very low valuations today. Despite high savings people are not buying high ticket, big ticket items."cks. While diversification beyond American companies is important, he stresses that country-specific issues and how those regulations affect the investment thesis must be evaluated.

"I think JD is best-positioned to kind of capture the recovery," Sassine tells Yahoo Finance, adding: "... because you have very low valuations today. Despite high savings, people are not buying high-ticket, big-ticket items."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JULIE HYMAN: As you look at, you know, that characterization of a value trap, I'm curious what you think of when you look at JD, if you would characterize it that way or if you think there's some real potential opportunity here.

ANTHONY SASSINE: Yeah, no, I don't think it's a value trap. Look, the e-commerce opportunity in China is a major opportunity for long term. We're still only at 27% penetration of total retail and JD is one of the highest quality e-commerce players out there with very superior logistic capabilities. But JD, it happened that this year, they focused they focus usually on brands and electronic and appliances. And that's not growing because China's recovery is not coming back.

But if you look at it for the future, I think JD is best positioned to kind of capture the recovery. Because you have very low valuations today and, you know, despite high savings, people are not buying big ticket items. If you look at low ticket items like clothing, apparels, footwear, these are growing double digits 15%, 17% year to date. That's why you're seeing Pinduoduo and VIPS doing well. So if you want to capture that recovery, I think, JD is better positioned.

But we always recommend with investors, these companies are going to go through cycles, ups and downs. We're very optimistic on the long term. We think everything is going to move online despite the short-term noise and the short-term bumps. That's why we recommend people to access these companies through ETFs like KWEB, you know, where you get the whole basket. And then as these companies go through cycles, you continue to earn the return or grow with that pie, the e-commerce pie over the long term.

JOSH LIPTON: And Jim, back to you I have, sort of, a broader question for you, Jim. I'm just wondering, if you're an investor and you're listening to this right now, before you put money to work in a Chinese name, a Chinese stock, I would think you have to understand what the regulatory environment is now and what it's going to be. And do you think, Jim, we really have any real insight and clarity there?

JIM WORDEN: Question, I don't think it's super clear right now. I think whenever we're investing outside the United States, there is a certain degree, a certain level of risk that we're taking. We know we need to be diversified. We know we need to have some exposure outside, but then it comes down to country-specific issues and what regulations can happen over in China what our regulations can do to those investment thesis. So we're constantly looking at the thesis how does that change and trying to stay on top of it.