Every quarter, large institutional investors submit 13F filings that detail which stocks they hold. While these reports are registered up to 45 days after the quarter ends, they still give us a glimpse into the recent activity of Wall Steet’s elite fund managers. One I follow is David Tepper, who runs Appaloosa Management and is known for buying ultra-cheap shares.
Worth north of $20bn, he’s one of the world’s top investors, delivering impressive compound returns above 25% since the early 1990s. Investors with this type of track record are always worth paying attention to.
What’s he been buying?
Yesterday (10 February), we learned that Tepper doubled down on Chinese stocks in the fourth quarter. Indeed, at the end of December, China-linked stocks and exchange-traded funds (ETFs) made up 37% of his entire $6bn+ portfolio!
Specifically, he upped his stakes in e-commerce giants Alibaba, JD.com, and PDD Holdings (NASDAQ: PDD). Two of these are now among his top three positions, with Alibaba at the top (worth over $1bn and 15.5% of assets) and PDD the third-largest (8%).
Meanwhile, he increased his position in JD.com by 43% in the quarter.
Tepper believes Chinese companies offer fantastic value. He points out that many are cash-rich and trading near single-digit price-to-earnings (P/E) ratios despite still growing earnings at double digits.
Looking at this trio, we can see how cheap they are compared to Western e-commerce/tech stocks.
| Market cap | Forward P/E ratio (2025) | |
|---|---|---|
| Amazon | $2.4trn | 37 |
| Shopify | $155bn | 107 |
| MercadoLibre | $103bn | 46 |
| eBay | $32bn | 17.8 |
| Alibaba | $264bn | 15.9 |
| PDD Holdings | $161bn | 9.8 |
| JD.com | $63bn | 11.2 |
Uncertainty
Why are the valuations so low? Well, consumer spending in the world’s second-largest economy has been weak for some time, impacting growth at many Chinese e-commerce firms.
Additionally, US-China relations have worsened and are likely to deteriorate further. Tit-for-tat tariffs have started and this has increased uncertainty and soured sentiment for Chinese stocks.
However, Tepper has highlighted how China is actively encouraging higher shareholder returns. Its central bank is even providing financial support to companies for share buybacks!
A P/E of 9.8!
I think PDD looks the most attractive of the three. It’s the parent of Pinduoduo, the fast-growing online marketplace that serves hundreds of millions of Chinese consumers who live in rural provinces.
However, it’s not just reliant on its homeland, as it also owns cross-border e-commerce platform Temu. This has been one of the fastest-growing apps in the world recently, tempting people in with its unbeatable cheapness.
Temu’s tagline is “Shop like a billionaire”, and I can see what it means. In early December, I paid around £25 for multiple bags of doll clothes and accessories, which surprisingly turned out to be the highlight of my daughter’s Christmas. The app is now a toy staple for me!
Amazon has taken note of Temu’s rise and recently launched an ultra-discount rival called Haul. So PDD is certainly a disruptor, despite its low P/E of 9.8.
One big risk to Temu’s international growth is the potential for a crackdown on its duty-free imports, which currently bypass customs charges.
Looking ahead though, analysts still have solid double-digit growth pencilled in for both revenue and earnings in 2025 and 2026.
With MercadoLibre and Shopify among my top holdings, I currently have enough e-commerce exposure. But for investors willing to embrace the risks associated with Chinese stocks, it might be time to consider shopping with a billionaire like Tepper and buying cheap PDD shares.
