Every Tuesday, I write about Barchart’s Top 100 and Bottom 100 Stocks to Buy.
This morning, as I checked the top and bottom 100, American Depositary Receipts (ADRs) caught my attention, with 10 in the Top 100. Ranked from 35th to 97th, two look worthy of your investment consideration.
One of the 10 is Banco Macro (BMA), a large bank based in Argentina, which I covered last Tuesday.
It jumped into the 5th position in the top 100 with a weighted alpha of 228.81. Today, it’s down to 174.01. Its stock has lost nearly 10% over the past week. Given that it had gained 36% in the month leading up to my article last Tuesday, it doesn’t surprise that it cooled off. Long-term, I still like it.
So, that leaves me with nine choices to find two.
Sea Ltd.
Sea Ltd. (SE) is a Singabore-based internet company whose three brands, Garena, Shopee and SeaMoney, provide digital entertainment, e-commerce, and digital financial services, respectively.
As I write this, it is in 71st position, down from 89th on Monday, with a weighted alpha of 143.43, higher than its 52-week gain of 117.75%, so it’s moving up the charts. It has a market cap of $54 billion. Analysts seem to like it, with a Strong Buy rating from 18 analysts (4.61 out of 5).
For the longest time, I thought the company was in the shipping business, but as its share price rose to great heights in 2021, it was impossible not to read about its various companies. Since hitting an all-time high of $372.70 in October 2021, its shares have lost 74% of their value.
Why buy now? Its shares are on a roll, up 26% in the past month alone after reporting better-than-expected Q2 2024 earnings in August. In Tuesday trading, its stock hit a 52-week high of $98.06, its 44th time hitting a 52-week high in the past 12 months.
As the company said in its Q2 2024 conference call, Shopee, Sea’s e-commerce platform, continues to take market share in South Asia.
“We are happy with Shopee’s market share in Southeast Asia and our sizable lead over our peers in the region. We are seeing more market share consolidation, and an industry-wide take rate increase. We believe this will move the industry toward profitability and sustainability, and we welcome this trend,” stated CEO Forrest Li in August.
As a result of this good news, Shopee expects to make money in the third quarter and beyond on an adjusted EBITDA basis, with GMV (gross merchandise value) growing by approximately 25% in 2024.
If you consider sequential growth, Sea’s adjusted EBITDA in the second quarter was $448.5 million, 11.8% higher than in Q1 2024, on a 2.7% increase in revenue. If not for Shopee's small adjusted EBITDA loss of $9.2 million in the second quarter, its Q2 2024 profitability would have been higher than a year ago, with Digital Financial Services' adjusted EBITDA up 20.2% and Digital Entertainment's up 26.4%.
It will be a profitable three-legged revenue generator soon enough.
Yiren Digital
Yiren Digital (YRD) is a Beijing-based AI-powered digital financial and lifestyle services provider. The business was founded in 2012 as a subsidiary of CreditEase, a financial and wealth solutions provider for the Chinese market. In December 2015, its parent spun it off, selling 7.5 million ADSs at $10. Each ADS was equivalent to two ordinary shares.
It entered the top 100 in 88th position on Tuesday, with a weighted alpha of 132.75, slightly lower than its 52-week gain of 148.77%. It has a market cap of $495 million. Few, if any, U.S. analysts cover its stock.
There is no question that the risk associated with Yiren Digital is significantly higher than Sea mentioned previously, in part because it’s partlyMainland China stock and partly because Chinese financial services stocks have been highly volatile in recent years.
The one thing I love about Chinese stocks and the companies behind them is that they often don’t care about the optics of selling financial and insurance services in addition to unrelated products and services.
“Satisfying diverse quality-of-life needs through membership benefits and various products and services, including entertainment, travel, skincare andmore,” states the company’s Q2 2024 presentation.
Its main products are short-term loans up to one year to customers aged 25 to 40 with good salaries or who are self-employed. The average loan is 6,500 Chinese yuan ($924.44). At the end of the second quarter, its total number of borrowers was 1.49 million, up from 1.01 million in Q2 2023.
It also sells insurance through its insurance brokerage. In Q2 2024, its gross written premiums were 1.06 billion Chinese yuan ($150.8 million), 16% higher than in Q1 2024, with a 5% increase in customers to 1.41 million, almost double the client base 24 months ago.
I kind of made fun of Yiren’s e-commerce ambitions, which it launched in the second half of 2021. These included its Life Plus Finance initiative, which combined financial services with online and offline consumption scenarios. I assume this means its financial services customers were rewarded by consuming more.
In Q4 2021, it had $9.7 million in revenue generated from these e-commerce initiatives. By Q2 2024, they were $70.1 million, generating 6x as much revenue as its insurance brokerage.
Surprisingly, there are a bunch of unusually active options for its ADS.
I like the Nov. 15 $10 call. With 45 days to expiration and a $0.30 ask price, the down payment is just 3%. Further, with a delta of $0.17997, it only needs to appreciate $1.67 (24%) over the next 6.5 weeks for you to double your money by selling before it expires.
You can’t even go to McDonald’s for $30 these days.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
