Talking Stocks: Alibaba (BABA)
Updated: Jun 23, 2021
Nothing stops Jack Ma.
Despite the Chinese government's monopolist issues with Alibaba and its founder, there's one obvious thing that overpowers it all:
Alibaba is China's Amazon.
In other words, we can't forego Alibaba as an investment just because there are governmental problems around it — it's an almost essential part of everyday life there.
Even better? Alibaba's stock price is down from almost $320 at the end of last year to $230 now: a huge drop that doesn't seem to be picking back up...yet.
The perfect time to pounce.
Move to China.
The first reason we should take a closer look at Alibaba lies in the fact that the world's money is moving towards Beijing.
US stocks will always be great, but there's a sense of suffocation now as stock prices rise two, three, four, even ten times quicker than profits — prompting investors to think again about where they're deploying their money...and then deploy it elsewhere.
👉 Notice how much higher US investments into China increased within the last 3 months of 2020 (right-side graph) as opposed to the other way around (left side). Even in terms of the world, countries poured $163 billion into China last year whilst only investing $134 billion into the USA —
Showing that there's a new game in town, and we should start focusing our money there too.
We also want to make sure that the companies we invest in have a platform to grow.
In other words, there's no use betting on a stock that's great on its own but sits within a stagnant industry - we want something that grows in tandem with its market.
And that's exactly what we'll get with Chinese e-commerce.
Think of it like water levels rising in a closed-off room: US stocks powered through 2020 and have mere centimeters left before they reach their ceiling.
Stock prices in China have also increased enormously in the past year, but their profit forecasts are much higher (especially in retail, as shown above), which is why the space left until their ceiling's reached is much more.
Hence, we've got a company here that's a leader in one of the most promising economies and a pioneer in one of the fastest-growing industries — what are we missing?
One of the best ways to check the potential of our stock picks is by seeing who else feels the same way. Obviously, this can't be the only type of research we do and too many others sharing our viewpoint may not always be a good thing either (since the potential of the stock is already priced in then) —
But a healthy balance between good investors backing the company and not too much hype in the news? That's a great start.
Tepper is one of the most respected investors on Wall Street - and one of the very few who can influence stock prices with a single statement.
The benefit? He's bullish on Alibaba.
In September-December of last year, Alibaba was Tepper's biggest investment in his main portfolio - specifically, 13% of his $6 billion was allocated to the former.
It's likely that he's sold some as the stock rose, but we're willing to bet that BABA is still a big part of his billions.
Goldman, Morgan, and others.
Looking at the right-most column below, you'll be able to see that some of the biggest investment firms out there have also been adding to their Alibaba investments ⬇️
Bringing that all together, the bottom line is this:
We've got a fundamentally sound company that's taking the reigns in a growing market here. Certainly, we need to consider that the government's involvement may put a brake on Alibaba's short-term growth (as evidenced by some of the red up there too ⬆️).
But for those of you looking for a long-term stock that you can comfortably put a little more money in — I think this one has almost all the characteristics we'd usually want.
Take a couple of minutes to research this stock on your own and then let me know what you think on Thursday's LinkedIn poll!
I'll see you next week for some recommendations on the best investing podcasts in the game 👋
If you'd like to start investing in stocks, here's a link to the platform I use ⬇️
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