As an American company, full of advisors from the United States, we tend to focus on companies that are domiciled in the US.

However, innovation is taking place all over the world, and not just within the borders of our country.  It is our job here at 7investing to empower you to invest in your future, and that includes opportunities at companies overseas.

On our most recent podcast, each of the 7investing Lead Advisors will introduce a company on our investing radar that is located outside of the United States.

We are also thrilled to welcome Dan Kline to our 7investing advisor team! In the first segment of our podcast, we introduce Dan and he describes his background, his process, and the types of companies he will likely be recommending.

Companies Mentioned:

SEA Limited

Equinor

Agora

JD.com

HDFC

Timestamps:

0:00 – Introduction and welcome to Dan Kline

11:07 – 7investing Team Podcast begin. Introduction to International Investing.

12:19 – Sea Limited (SE): Matt Cochrane

17:04 – Equinor (EQNR): Maxx Chatsko

21:58 – Agora (API): Austin Lieberman

27:43 – JD.com (JD): Steve Symington

33:29 – HDFC Bank (HDB): Simon Erickson

Complete Transcript

Simon Erickson

Hello everyone and welcome to this month’s 7investing podcast. My name is Simon Erickson. I’m very excited because we are welcoming a new lead advisor to 7investing. His name is Daniel Klein, and I’d like to introduce him to all of you in the first part of this month’s podcast. Dan, first of all, welcome to 7investing.

Dan Kline

I am excited to be here. It has been a very long wait.

Simon Erickson

We are very excited to have you too. Could you start off by telling us a little bit about your background?

Dan Kline

Sure. Um, you know, I was born in 19… No, just kidding. So

Dan Kline

I’m a journalist by trade. I started as a college newspaper editor. I worked part time at at a trade magazine covering the audio industry. My boss got fired over Christmas, and I’m still not sure why, I ended up becoming the editor of that magazine. So my senior year of college, I worked full time at at a magazine. I traveled for work, and like explaining this to my teachers was not easy in a pre cell phone day. It’s like yeah, I’m not going to be in class. I’m in Vegas that week for a trade show like that was a little tricky. I was an early internet pioneer. I was the editorial director of a site called uproar.com, which IPO’d back at a time where you could IPO with no revenue. I then worked for a men’s lifestyle startup that got bought by Playboy, and then have had a really weird career since then. I ran a giant toy store. I spent four years working in my family’s ladder and scaffolding business. And I actually think that’s how I got into writing about business because I kept interviewing for jobs, and I would say, when are you going to find a business guy who’s actually bought commodities, like I bought steel, like I understand how all this works. So finally, a friend of mine calls and he says you want to work for Microsoft? And I said, “sure.” So the guy from Microsoft calls me up, and he interviews me a little. And he says, Do you want the job? And I said, what is the job? He said, I can’t tell you what the job is, do you want the job. And I said, I guess I want the job. So I was the launch editor for The  MSN Money app, but wasn’t called that it was the Windows 8 Finance app at the time. But I was the guy that picked what stories went went in the app. And that’s now done incredibly, terribly by a robot. There’s no more people involved. But there used to be people and I was the person at first and I stayed there for a little over a year. And then I went to the Boston Globe. That was my childhood dream. I grew up reading the Globe. And I was running the business desk for boston.com. And what I didn’t know about the Boston Globe, which is a lovely place, is that there’s a divide between digital people and print people. But I wasn’t clued into that. So I was blissfully unaware. And most of the .com editors on the boston.com side didn’t sit with the print people. But I did. I actually sat with the business team who all hated me and nobody spoke to me for like four months, except for the business editor who was the acting business editor at the time, the regular one was out on maternity leave, and he liked me and we got along.

So I pushed and pushed and pushed. And he finally let me write for the write a story for the paper thinking it was just going to be a big caption for a photo. And I wrote a story on PAX East which is a video game and gaming convention. It’s a lot of people come in costume. That’s a pretty cool thing. And I handed it to the editor, I was working with a he he read it, and I had sent him like a one o’clock draft so they could get get an early one up. And he he texts me back or emails me back and he says, “aaaaaaaaaaah!  Oh wait, you can do this. You can write.” I’m like, “Yes, I have 20 years of journalism experience.” The fact that I didn’t come from the Pittsburgh Post Gazette or whatever, doesn’t mean I can’t do this. He’s like, okay, let’s let’s let’s work on the story. Let’s get it in front page contention. So my first story did not end up on the front page, but was pitched for the front page that day led the business section. So I became a regular writer. The problem is my first day at the Boston Globe, which is really my introduction to the market and to covering business. But you know, other than being a curator at Microsoft, my first day, there was the day the New York Times company put us up for sale. So I was I we didn’t move I still lived in Connecticut about two and a half hours away. I was commuting and staying at my mom’s and Salem Mass lot, it was really difficult. So I ended up going back to work for a small company in Connecticut that owned two daily newspapers, I was the editor of two daily newspapers. And on the side I started writing for Motley Fool for a now defunct product called The Business, and the idea was to do things a little bit broader than just stock market coverage and, and I worked there from like three in the morning to five in the morning for like two or three months before I finally went to my boss and quit my job which by the way, at the time, I was getting paid $50 a story. So this wasn’t a smart decision I made. I quit my job. I went to work with a business partner. He was building websites, we just kind of sat in a room together and worked all day and eventually ended up buying some websites and doing some other things that made me some money. But at this time I started getting indoctrinated. I started learning this is how the market works. I started out as a journalist as a news reporter, who was adding a little bit of analysis.

And then over six years, I actually like woke up a few months ago and realized, oh my god, I’m a world class analyst like I can. I can compete with all of these people who that’s how they define themselves because I found myself hosting live shows with you know, some of the biggest names and going “Oh, wait a minute”, like my opinion is is not only as valid, sometimes it’s more valid, and the example I’ll give an I hate to talk about this one, but Luckin Coffee. Nobody can predict fraud. But I always predicted Luckin was going to be a failure. Why? Because their business model was giving away coffee to get the Chinese to like coffee. Here’s the problem.  The premium brand is Starbucks, they were giving away a product to get people interested in what their competitor did.   It wasn’t going to help their brand.  It was a bad strategy.  It was never gonna work. It’s the old, I’m giving away, you know, $20 bills for $19. And I’m making it up on volume.  It wasn’t gonna work. So I, you know, I gained a lot of confidence. And from the point you and I started talking right at the beginning of the company, was really when I started thinking  “wow, like, this is what I want to do, like, I want to help people, you know, do better with their money.”

Simon Erickson

Dan, one of the things I’m so excited about working with you here with 7investing is that you don’t have not only had your pulse on what’s going on in the business world out there from the journalism perspective, but you’ve also run the operations of so many different types of companies.  Such a diverse background, it’s fascinating, I’m really excited to see your perspective on so many things. As a Lead Advisor for 7investing, you’re going to be making recommendations every month.  I wanted to ask you, in my next question, how would you describe your investing style? And what types of companies do you tend to look for?

Dan Kline

So I’m a singles hitter, who occasionally shocks you with a homerun. So I, you know, I follow areas that people aren’t that interested in, I follow retail. And look, I could have told you not to invest in a lot of retailers in the last few years. But it’s tricky to tell you which ones were good. Is it sexy to say go buy Costco, or Walmart, or Target?   No it’s not. But those are all good companies, you should probably own because you don’t have to worry when you own those. And I’m not saying those aren’t going to be you know, 10 baggers. But those are good, like nice things to just like you get a little extra money, have a little bit of that, it’ll go up steadily, I often call them elephant up a hill stocks, like, you know, it’s going to get there, it’s not going to be that exciting. But then occasionally I find some you know, it could be retail, it could be a cannabis stock, it could be a little tech stock, I could cover a little bit of everything. I’m a voracious planner and reader, which you’ll see as we start our live streams. And sometimes I’ll find something and I’ll just spend like six months looking at it, I’ll watch the earnings calls, I’ll I’ll interview the CEO, like I’ll do, and, and I’ll pick some company that like when I bring it up at the meeting, you all have to like look it up. And, and, and maybe that’ll be my pick. So you know, if you look at if I make 12 picks this year, nine of them are gonna be companies you’ve heard of, but when you hear my case for it, you’re gonna feel a lot better about it than maybe you did. The other three might be companies that you’re like, wow, that’s exciting. And if one of those threes hit and one will, you will do really, really well.

Simon Erickson

And you mentioned retail, but I know you also have a lot of experience in investing in media and entertainment companies as well. Right? And telecom companies.

Dan Kline

Yeah, media and entertainment. I’m probably the leading expert on cord cutting. Not that that’s a thing to be that proud of, but like nobody’s followed it on the level I have and the shift we’re going through with. Look, everyone wants like the latest 5G stock what and they want you to name some like tech company they’ve never heard of that makes like a widget that’s going to sell. That’s not how it works. It’s really understanding what the adoption cycle is going to be. What are T Mobile, Verizon and AT&T actually doing? They’re all running commercial saying they have 5g, you know what they don’t have, they don’t have 5G. That is a real problem, like, you know, and like, what’s Comcast or Charters business going to look like? And how does that fit into, you know, what I invest in you, you might not invest in Comcast or Charter, but you need to know what they’re doing and what their sort of competitive advantages as Internet service providers that you know, informs how you might pick other companies.

So yeah, I’ve often been called a jack of all trades, my negative about that is that phrase goes jack of all trades, master of none. I am a jack of all trades. But I’m a master of a handful I have spent the last seven years studying half of my day is just reading, I get up at seven in the morning, every day for the last seven months of the pandemic. And I prepare a document of this is what’s going on in the world to inform shows I’m going to do that’s that’s work. I like doing I’ve always been a reader, though, when it comes to reading books now I read absolute garbage, because my whole day is spent in like, you know, white papers and news stories and who knows what. But, you know, I am really excited to sort of change people’s minds on how they look at certain types of investing and types of companies.

Simon Erickson

Absolutely, Dan, we are so excited to have you on the team. For everyone listening to this, Dan is a very high impact guy. He’s an advocate of the individual investors, he shares the same mission that we do of helping you invest in the stock market and make sense of this thing and get more actively involved in the money that you’re saving out there. Dan, how should people get in touch with you? We know that you’re going to be doing some live stream events with 7investing. But is there other ways that people can reach out to you also?

Dan Kline

Sure, so I haven’t changed I’m going to change my Twitter handle, but I haven’t changed it because I get to promote it in the former place I worked and it’s beneficial to everybody for it not to change. So right now my Twitter handle is @worstideas. That is a play on my book, “Worst Ideas Ever”, which is sort of a business book. It’s like new Coke and the XFL, the original one, not not the new one. In some of the things it’s kind of a funny scholarly treatise. It’s really good book. They don’t send me any more money when you buy it. They should, but they don’t. So you know, buy it if you like, but you don’t have to you so you can follow me there. I am easy to find on on Facebook. It’s facebook.com/DanKlein, but probably the easiest thing to do, just shoot me an email. I am “dkline@7investing.com”, that is the number seven or you can write it out investing.com. That email is up and running.

Simon Erickson

Absolutely. And like you said, @worstideas. There’s a lot of changes underway in the media industry and the retail industry and the entertainment so I’m really looking forward to seeing some of your recommendations Dan, and welcome to the 7investing team.

Dan Kline

Thanks for having me. I’m excited to get started.

Simon Erickson

With that said will now join the rest of this month’s 7investing team podcast!

Simon Erickson

Hello everyone and welcome to our 7investing team podcast here at 7investing. Our mission is to empower you to invest in your future. We do that by providing our best stock market opportunities for just $49 per month, but also educational content such as this podcast. My name is Simon Erickson. I’m a Lead Advisor here at 7investing. I’m joined by my other Lead Advisors, Matt Cochrane, Steve Symington, Austin Lieberman, and Maxx Chatsko. Gentlemen, welcome to the podcast. Thanks for being here!

Team

Excellent, can’t wait to get started.

Simon Erickson

Today’s topic is going to be about international investing, because investors kind of have a home court bias, where we’d like to invest in the companies that are in our own country, that we’re most familiar with, perhaps we’re already consumers of their products. But truly innovation is taking place all around the world. So it always helps as an investor to keep in mind those global opportunities. And so we’re each going to be introducing a company that is on our investing radar, that is not domiciled in the United States today. And before we get started, just a reminder, these are not official recommendations. These are simply ideas that have our interest and might be worth more due diligence in the future. So Matt Cochrane, I’m going to start with you. What is one international opportunity that’s on your radar right now?

Matt Cochrane

Yeah, thanks, Simon. Yeah, and it’s so important to know that there are opportunities all around the world and there’s no need to just limit your scope to the country we live in. You know, one company that’s caught my eye and I actually took a small position in earlier this year was a Singapore based Sea, I it’s quickly becoming a digital powerhouse. It has three very fast growing segments that are poised to capture more upside and in some of today’s like largest industries, and that includes like video games, mobile commerce and digital payments.

And so just real quickly, like Garena that is Sea’s global game developer and publisher. It has a significant presence in Southeast Asia and Latin America. In 2019, it’sgame Free Fire was the most downloaded mobile game in the world, across Google Play and iOS, according to App Annie. And its latest quarter, Sea’s digital entertainment revenue grew 62% year over year. Shopee is Sea’s e commerce platform, and that connects buyers and sellers supported by payments, logistics, fulfillment, and other value added services. If you think Shopify, you’re kind of in the right ballpark. Their revenue in this segment, and its latest quarter jumped 188% year over year. And then finally SeaMoney. That’s Sea’s e-wallet services. It offers just a bunch of financial products and services, mobile wallets, payment processing, credit related digital financial offerings, It’s branded depending on the market it’s in, it’s branded differently. Sometimes in some markets, it’s known as AirPay. In some markets, it’s known as ShopeePay, in some markets is known as ShopeePaylater. It has a bunch of other brands, but it’s all encompassed under SeaMoney. And while it’s still the smallest of Sea’s business segments, by a large margin, as far as like revenue contributed to the company goes, it’s still in its latest quarter saw more than $1.6 billion in total payment volume, and it had more than 15 million quarterly active users in Sea’s most recent quarter.

So that’s the company that caught my eye, it has exploded this year, like I took a small startup position earlier this year before before pre-COVID. And I bought it between $40 and $50. I was hoping to add to it and it kind of got away to me it’s kind of tripled unbelievably this year, but that’s just because it’s in all the right markets. Uh, you know, in a post COVID world, you know, as mobile technology is taking off, especially in emerging markets, where access to to hardline internet is not necessarily popular or widespread. And so just it’s in all the right places for emerging markets. And that’s why it’s even, it’s even starting to compete with Mercado Libre on its own court in South America. It’s just, it’s growing in a lot of different markets around the world. And so it’s a company that’s really caught my eye.

Simon Erickson

Yeah, absolutely. Matt, you said they’re based in Singapore, but it’s it’s markets, really mostly Southeast Asia, and is one of the reasons that it’s doing so well, that it’s different than United States is because they’ve kind of leapfrog this desktop, you know, fiber in the ground and gone strictly to mobile?  Is that an opportunity for them?

Matt Cochrane

Oh, yeah, absolutely. And it didn’t like yeah, it’s all across Southeast Asia. It’s in Thailand. It’s in Vietnam. I know there’s a large market. It’s most southeastern Asian countries, it has a significant presence. And like I said, it’s even going into Latin America like it’s game Free Fire is extremely popular in Latin America? And one of the reasons why is like it’s Free Fire, it’s almost like it wouldn’t necessarily be a popular game in the US because it’s a it’s graphic standards are a little bit less. It’s not meant for like a 4g LTE connection. But it’s great for like a 3g or lower tier 4g connection. But it’s just like one of those first person shooter games, shoot ’em ups, like a like Fortnight and other popular games, and it’s just, it’s just exploded in popularity.

Simon Erickson

Perfect. And the ticker on that mat, I believe, is SE correct?

Matt Cochrane

That is correct. It’s listed on the NASDAQ. So it has an ADR in the US.

Simon Erickson

Great, thanks very much, Matt. Sea Limited. Let’s go on to the other side of the world here. Maxx Chatsko, let’s go with you. Next, you have your idea on your radar is a European energy company. Tell us a little bit more about this one?

Maxx Chatsko

Yeah, so I use this company called Equinor. I don’t own it, I don’t plan on buying it anytime soon. But I kind of use it as a gauge to see how oil and gas majors are thinking about the energy transition. So Ecuador a few years ago, is actually called Statoil. And it changes name to remove the word oil from its name. And it also made this pivot in a way to kind of refocus investors on the long term. So it’s taking it’s, it’s a Norwegian company. So it has a lot of experience in the North Sea, pretty choppy, volatile, off sea drilling area. So it’s taking its experience there, and offshore oil rigs and gas rigs, and using that to become a first mover in offshore wind power assets. So it’s kind of an interesting transition, if you will. And especially because the offshore wind industry globally isn’t very large.

So it’s still kind of this it’s expensive, there’s still a lot of questions about isn’t going to become a thing. But on paper, it makes a lot of sense, right? You have a lot of major population centers along coastlines. And offshore wind is intriguing, because it can be very, you can build huge wind towers. I mean, some of those are, like, taller than the, you know, Statue of Liberty or I mean, they’re just massive. And, you know, they, they provide power, more consistently than onshore wind. So it’s exactly what you would need for, you know, a large city. So Ecuador, and bought some acreage off of, you know, around the world, in Europe, in the United States and China, throughout recent years, and in the United States. That’s kind of interesting, because there’s virtually no offshore wind industry here at all. We have one offshore wind farm, it’s very small.  I think its off the coast of Maine, it’s up in New England. And it’s like nothing, it’s it’s, you know, pretty old technology. So Equinor started going around and saying, Hey, we’re going to buy some, some acreage off the coast of Massachusetts, some off the coast of New York. And this is when the Department of Energy started to really open up acreage for options. So the company bought a few different positions in the in offshore. So like it owns the Empire Wind Project off the coast of New York City, also owns Beacon Wind off of the coast of Nantucket. And they bought these, you know, acreage plots for about $180 million total. And then just recently turned around, just, I think, this month, actually, and sold half of the equity stake to BP, fellow oil and gas major, for over a billion dollars, and the two agree to, you know, develop the US market. And so it’s a kind of an interesting, you know, partnership there, right, the pipeline for the US is, in total offshore wind projects is like around almost 30,000 megawatts. So from zero to 30,000. That’s pretty impressive.

And a lot of these might come online, this before the end of this decade, and there’s like another like pipelines a little bit further off, maybe, but up to 2035. So this is something that could really come out of nowhere, be a huge opportunity, provide a lot of energy, a lot of electricity that’s, you know, renewable, clean, and help some of these major population centers wean themselves off of, you know, dirtier sources of fuel. So it’s important to note though, that this is a very small part of these overall businesses. Right now in Ecuador. It’s still predominantly generates most of its money from oil and gas production. But you’re starting to see other companies you know, you have Royal Dutch Shell, BP taking stakes in renewable power, asset developers and you have total the French major is investing in this very big investment. Energy Storage, for instance, lithium ion batteries. So it’s kind of interesting to see where these going to go, as the world starts to transition away from liquid fuels.

Simon Erickson

It’s really interesting Maxx. It seems like wind, just like oil, is a kind of a geographic presence. Right? There are certain places that are getting the best wind are the most interesting that companies are wanting to place those on. Is this an advantage for Ecuador in the long term if they’re going out and buying the most attractive spots before everyone else is?

Maxx Chatsko

Yeah, I think early on probably because it gobbled up all that acreage when it was still like a big question mark. Is this market going to develop? So yeah, I think so.

Simon Erickson

Yep. Great. Okay. And the ticker on that I believe EQNR are correct. Previously Statoil, now Equinor, based up there in Norway. Great One, Maxx. Let’s go over to China for the next one. Austin Lieberman, your company is a Chinese based tech company.

Austin Lieberman

Simon, what if I told you that you could invest in a company with 128% revenue growth, they had $98 million in revenue their last quarter, they grew active customers by 85%, gross margin of 66%, $1 based net expansion rate, meaning customers are spending this much more each year of 183% over the trailing 12 month period. And they’re profitable on a non adjusted basis, with $3 million in net income in the last quarter. What if I told you, you can invest in that company? What would you say?

Simon Erickson

I would say that is amazing. And I would demand you tell me the name of this company.

Austin Lieberman

So I will, I will tell you the name of the company, this company is called Agora, ticker symbol as API. And they’ve got actually a really unique structure there. They’ve got dual headquarters in China, and Silicon Valley. But it’s listed as an ADS in the United States. So technically, they are a Chinese headquartered company. And I talked it up a lot at the beginning. Right, those are fantastic numbers. But, as we’ve seen from from some companies that aren’t necessarily – they don’t have to follow all of the SEC regulations, if they’re not listed inside the US, there are risks that can come with companies that that aren’t as highly scrutinized by the SEC. And so as great as all of those numbers are, even me personally, right now, if that was a US listed company, or a company that I was I was more comfortable with, I’d probably want to invest right now. But I’m still in kind of a learning mode to just try to learn more about this company. But those numbers are fantastic, fantastic.

And so what Agora does, is they offer real time video calling, voice calling, live audio, and video streaming, as well as real time messaging. And they serve all the biggest industries. So social media, gaming, retail, education, even telehealth. And basically, they just allow developers on different teams to build these video real time video messaging capabilities into whatever platforms they’re using. So if you’ve heard of a company called Twilio, in the United States, they do a lot of API stuff where you can basically build messaging and even video from app to app, or build real time video integrations. They do something similar to that, specifically with video. And then if you think about it, a big use case for this is one of the more popular use cases is for retail streaming. So brands have utilized the technology to stream like live product demonstrations. And then you could have interactive features like text and video chat, so that so that if you’re trying to sell something over social media or whatever, your audience can interact with you.

It was founded by Bin Zhao, I think is how you say it, and it was actually founded in Silicon Valley in 2013. Prior to founding Agora, and this is interesting is his his background. He served as a director of a NASDAQ listed company called called YY. And most notably, he was a senior engineer at WebEx from 1997 to 2004. The same time that Eric Yuan was there from the founder of Zoom. Again, their main executive offices are in China. That’s where most of its revenue comes from. More than 38% of its revenue comes from its top 10 customers, which are all in China. And so there’s there’s a lot of international opportunity there but also some international risk because I also as a consumer, I don’t know the trends that are going on in China, or other countries, like I’m familiar with them in the United States.

Simon Erickson

Yeah, fantastic Austin. Well, one thing that I noticed about Agora is it’s a usage based model for revenue. And this is something you and I talked about a little bit before. How important is that to, you know, kind of this machine to machine age that we’re living in right now? Is that a huge advantage for investors?

Austin Lieberman

Yeah, I think I think so. And so the the kind of model for SaaS, and we’ve heard people talk about this, right, even as late as Jeff Richards, we just had him on the podcast, he’s a venture capitalist. There’s usage based and then per seat model, a great thing about usage basis, even as we’re entering a world where maybe companies are lowering their headcount a little bit. Still, if more data or more video or more apps are used, that usage can still go up, even though seats are going down. And so that’s the benefit of a usage based model. It can work the other way, though. So just investors be aware of that sometimes usage based isn’t isn’t the absolute best either. So there’s pros and cons.

Simon Erickson

Yep. Great, great pick Austin. And just for anyone that’s unfamiliar with the acronym, Austin had mentioned ADS in there, which stands for American Depository Shares. You also probably hear ADR’s a lot, which is American Depositary Receipts. Both of these mean that there’s a sponsor bank within the United States, which means you don’t have to go to a foreign exchange to buy any of these companies that we’re talking about today. You can buy them directly on American exchanges, don’t have to worry about the exchange rates, don’t have to worry about international currencies or any of that stuff. It makes it a lot easier when you’re when you’re dealing with companies that have done the work to get their shares listed on American exchanges. Steve, let’s keep the trend going in China here, you also have a Chinese e-commerce leader.

Steve Symington

I do. JD.com might be a name that some of you are familiar with, if you’re interested in investing in China, but it’s been on my radar for a couple different reasons lately. First, I actually opened my first position after following the company for years back in March. It turned out to be good timing-shares have roughly doubled since then. But I still think it has massive upside from here and gain could accelerate its growth quite a bit over the next few years. Right now, you know, we’re already talking about a pretty big business, its market cap is I think, 119 billion as of right now. And I mean, that’s big in its own right. But it’s still also dwarfed by Amazon that’s sitting I think, 1.54 trillion as its market cap right now. And it’s also similar, as Amazon, here in the United States in the JD.com has made the decision really early to invest heavily in its own logistics, warehousing and delivery infrastructure networks throughout China, rather than basically serving as a platform as say, eBay ha done and kind of like Alibaba, in that sense.

But JD’s basically work to differentiate itself from competitors. Through this these heavy ingest investments in its logistics, warehousing and delivery infrastructure, and, you know, that basically has come at the cost of profitability in these early stages. But over the long term, I think we’ll see similar fruits is Amazon has enjoyed in growing its enterprise value. And it’s really still doing very well, revenue last quarter was up I think, 34% year over year to 28.5 billion. And its operating income more than doubled to 714 million. And I think it’s its mobile user base increased by 40%. year over year, we saw annual active customer accounts up almost 30% to 417 million people. That’s bigger than the population of the entire United States, which is just stunning, really, and you know, it’s also working to kind of unlock the value of some of its subsidiary businesses, through a series of IPOs. So that should be something to watch. Reportedly working to have IPOs for JD Logistics, it’s fine. That’s supply chain business. It’s finance arm: JD Digits, online healthcare unit: JD Health. So lots of different pieces that it’s kind of working to unlock shareholder value by potentially kind of breaking them out into their own IPOs. But it’s it’s also another thing that gets keep in mind is that you know, you’re talking about China population, 1.4 billion people they have a fast growing middle class with growing income.

And in China, just over a third of their overall retail sales currently comes from e-commerce channels today, and that’s according to Statista anyway, up from about 12%, just six years ago, and they also expect that Chinese e-commerce should more than double its share as a percentage of overall retail sales to 64% of China’s total. That really bodes well for any leader in the space especially JD, given its differentiation with those higher investments in logistics and delivery, and it’s really putting its money where its mouth is. Lately, I think only recently, it spent around $440 million to to acquire I think it’s called Kuayue Express forgive me if I mispronounced that. It raised almost 4 billion through a secondary Hong Kong listing recently. And they say they’ll use those proceeds to primarily invest in key supply chain technology initiatives, and improve operating efficiency. So as we see kind of the fruits of that scale, it should really be really impressive for shareholders. And finally, before I wrap it up, we got to talk about cloud computing efforts. You know, after all, Amazon’s AWS served as a lucrative source of incremental high margin revenue, JD Services segment, they don’t even break out their cloud revenue yet, because it’s still so small, but these are still early days. I’ve seen a number of interesting partnerships lately to expand that reach. And I think I think it’s gonna be a much bigger business, you know, 5-10 years down the road than it is today.

Simon Erickson

Yeah, and Steve, I know you’re a huge fan of robotics and follow that that very, very closely. Tell me a little bit more about JD’s logistics network. I mean, that’s something they’ve put billions of dollars into the last couple years. Is that a huge competitive advantage against other e-commerce companies?

Steve Symington

I think it’s massive. And it’s something that a lot of other businesses in China just don’t have, and aren’t spending a lot of money on. You know, and there are, I guess, some of the big leaders, you know, there’s potential that some of these really well funded competitors will work to build out their own logistics networks, but it’s something that JD is known for, and it’s pouring billions and billions and billions into this. So with automated warehouses and, and you know, contactless delivery options, and these are things that they have really worked really well on, and really, really focused on, especially during the pandemic, to maintain their momentum while any other competitors might stumble. And I think those investments especially in like AI, robotics, those sorts of things, those high tech ways to expand their logistics network will pay dividends. Maybe not literally, but in terms of expanding its enterprise value.

Simon Erickson

Yeah, absolutely. JD.com that’s a great one, Steve, and I’ll we’ll wrap this all up with my company is an Indian bank called HDFC Bank. Ticker on that is HDB. And what really attracts me about this is is that India is got such a fast growing middle class, right? This is a, this is a country that as a whole, could be expanding its GDP by 7 to 8% per year for the next decade, just as there’s more purchasing power for people to be buying things. But the government of India itself also knows that with all of this fast growing middle class, it’s going to have to have a lot of responsibilities as well, it’s going to have to provide power for those people. So it’s building solar farms around the country, it’s going to have to have healthcare insurance for those people. So it’s got kind of a healthcare scheme for the lowest earning half of its population right now.

And so India to do this is cracking down on paper currencies, because there was a lot of fraudulent business activity taking place that people just weren’t paying taxes for. And it needed that tax revenue to fund those larger initiatives. And so a couple of years ago, about five years ago, now India invalidated its 501,000 Rupee notes that paper currencies said, Hey, if you want to keep those paper currencies, you’ve got to change them, exchange them with the banks. And so a lot of people did that they kept currencies, but it also suddenly nudged a lot of its population to do digital banking, where they weren’t exchanging anymore with cash currencies, but actually using their cell phones for digital transactions and digital banking. And this is where HDFC really comes in. Because HDFC now is using cell phones for more than 90% of the transactions that are taking place. This isn’t people going into the bank, like we got used to when we were growing up, or using ATMs to get money out. But it’s just completely over a cell phone. And that really gets its cost structure extremely low.

HDFC is the country’s largest bank. So it’s got more and more deposits that it’s bringing from India’s 1.3 billion people, at a very low cost to serve those operations. And of course, when the country is growing at 7 or 8% GDP, there’s plenty of loans to be making out there for other businesses that want to start building out their operations too. And so HDFC is just a company that I think is going to be a compounder for several decades. It’s in a huge amount of tailwinds from everything taking place in India. And it’s one that I definitely have my eyes on internationally.

Matt Cochrane

Simon, it’s interesting to note to about HDFC Bank. I mean, it is growing really fast. Its earnings from 2015 to 2019, grew four and a half times its earnings per share. I mean, that’s incredible for a bank, you just, you’ll never see that in the US.

Simon Erickson

Yeah, it’s one of those inflection points. Right, not just growing linearly.

Austin Lieberman

Yeah, I mean, I’m not super smart on the banking industry, especially not internationally. How reliant are they on interest rates? And what is that dynamic like India?  Are there any differences versus India compared to US banks?

Simon Erickson

It is. It’s much higher over there right now. And a lot of people are used to getting just interest rates from more conservative investments rather than putting your money in the stock market, you can get a much higher interest rate, or at least for most of the population, just just parking that in a in a bank, you know, in a CD or something that’s a lower cost, lower risk investment. And exchange rates kind of also are an interesting dynamic between the United States and India too.A lot of Indian investors that are starting to learn about investing, are investing internationally because the exchange rate is favorable for them too. But to answer your question directly, Austin, I think that it’s a benefit to HDFC that the population of India likes more conservative investments, like putting your money in a bank and then letting HDFC use that for its own loan book. And so there’s our international opportunities that our teams come up with this month. Again, to recap them Matt said SEA Ltd. Ticker SE, a Singapore based gamemaker e commerce provider and also finance company, maximun with Equinor $EQNR, which is based in Norway an energy company looking more at offshore wind, Austin with Agora, ticker API, which is enabling video calling and streaming for a lot of apps that are out there in China. Steve went with JD, which is the ticker, JD, also in China, and one of their e-commerce leaders. It’s building out a logistical network. And I went with the Indian bank HDFC Bank, which ticker is HDB.

So I hope that everyone enjoyed this month 7investing. team podcast once again. Our mission is to empower you to invest in your future. We are 7investing. Thanks for tuning in.