Kevin Kelly, Benchmark Investments managing partner, discusses equity markets, options markets and his JD.com options strategy with Bloomberg’s Julie Hyman on “Bloomberg Markets.”
JD.com (NASDAQ:JD), traditionally known as a retail company, has invested heavily into industrial properties including logistics, distribution, and fulfillment facilities and it has lead to another leg of growth for the company. Similar to Amazon, it also has a third-party business, where merchants can sign on for JD.com to handle the sales and some or all of the logistics. JD’s retail prowess can be felt in China as they command about 20% of all retail sales. Also important to note is that JD maintains a number of strategic advantages over Alibaba (BABA), primarily nationwide distribution and last mile reach with warehouse and fulfillment facilities.
Recently, Google invested $550 million in Chinese e-commerce powerhouse JD.com as part of the it’s efforts to expand its presence in fast-growing Asian markets and battle rivals including Amazon.com. The agreement calls for combining JD’s supply chain and logistics expertise with Google’s technology strength in Southeast Asia, the U.S. and Europe. The ultimate goal of the collaboration is “offering helpful, personalized and frictionless shopping experiences.”
Kevin Kelly structures a long term options trade to invest alongside, what he calls, the ‘holy triumvirate’ of Tencent, Wal-Mart, and now Google investing at the equivalent to $40.58 per share (American Depository Receipt). JD is 18%-owned by Tencent Holdings (700.Hong Kong), China’s largest social platform and a key traffic source as well as Wal-Mart owning about 10% of the company.
More Coverage here:
- Trade: LEAP Call Spread
- Buy JD Jan. 2020 $37 Call for $8.50
- Sell JD Jan. 2020 $60 Call for $2.20
- Total Trade Costs $6.30