The Problem with Qudian Stock
𝗧𝗵𝗲 𝗣𝗿𝗼𝗯𝗹𝗲𝗺 𝘄𝗶𝘁𝗵 𝗤𝘂𝗱𝗶𝗮𝗻 𝗦𝘁𝗼𝗰𝗸
🦘 Qudian Stock $QD lost 40% in the last year, before gaining 200%, then losing 40% again. Over the long-term, Qudian is in a deep bear market. Normally, this should not worry value investors since 𝙫𝙤𝙡𝙖𝙩𝙞𝙡𝙞𝙩𝙮 𝙞𝙨 𝙣𝙤𝙩 𝙧𝙞𝙨𝙠. The stock is selling at 0.25X book value today and looks like a deep value stock but is it really that safe?
📉 Qudian recently reported 4th quarter earnings. Revenues were down 58% in 2020 compared to 2019 and net income down 70%. There were lower economic activities and more regulations to explain this. But the good news is that the recovery is happening, the delinquency rate is falling and is now even below its 4Q19 level. However, we need to acknowledge that they are now being more choosy in their loans. This means 𝙡𝙚𝙨𝙨 𝙧𝙚𝙫𝙚𝙣𝙪𝙚𝙨 𝙖𝙣𝙙 𝙥𝙧𝙤𝙛𝙞𝙩𝙨 𝙛𝙤𝙧 𝙩𝙝𝙚 𝙘𝙤𝙢𝙥𝙖𝙣𝙮 𝙞𝙣 𝙩𝙝𝙚 𝙘𝙤𝙢𝙞𝙣𝙜 𝙮𝙚𝙖𝙧𝙨.
💰 Qudian maintains a 𝙜𝙧𝙚𝙖𝙩 𝙗𝙖𝙡𝙖𝙣𝙘𝙚 𝙨𝙝𝙚𝙚𝙩, they were able to buyback shares in 2020 and also bought back much of their debt. I've mentioned before that Qudian is trying to do something like Berkshire Hathaway $BRK.B , using their cash to buy other businesses. But most of these businesses are failures for now.
🚬 Qudian doesn't look like a stock in which Warren Buffett will invest in but it looks like a stock in which Warren Buffett would invest in but it certainly looks like a stock in which Benjamin Graham would invest in (although he was very sceptical of foreign securities in his times). 𝙌𝙪𝙙𝙞𝙖𝙣 𝙞𝙨 𝙖 𝙘𝙞𝙜𝙖𝙧 𝙗𝙪𝙩𝙩 𝙨𝙩𝙤𝙘𝙠.
🚀 Qudian is not only trading under its book value but also under its net current asset value (current asset minus total liabilities). This doesn't mean that the market will eventually realize that Qudian is undervalued. Maybe it will forever remain at 0.25X book value. 𝙏𝙝𝙚 𝙘𝙤𝙢𝙥𝙖𝙣𝙮 𝙡𝙖𝙘𝙠𝙨 𝙘𝙖𝙩𝙖𝙡𝙮𝙨𝙩𝙨 𝙛𝙤𝙧 𝙩𝙝𝙚 𝙛𝙪𝙩𝙪𝙧𝙚.
Qudian is still a good investment at current price but without new catalysts, the price will not go up. Therefore, you need to make sure you 𝙥𝙧𝙤𝙩𝙚𝙘𝙩 𝙮𝙤𝙪𝙧 𝙙𝙤𝙬𝙣𝙨𝙞𝙙𝙚, you need to know when to take profits on the stock.
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