Alibaba Stock: 5 Reason's it is time to BUY
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- Опубликовано: 4 авг 2024
- This video is my opinion and not financial advice.
Is baba a buy? Is Alibaba a buy? Why is burry buying baba? Investing in China, China Stocks, China investing, growth stocks 2024, what to buy in 2024, investing in 2024, value investing, value investing 2024
00:00 Intro
00:40 1. Cash
01:25 2. Debt
01:50 3. Margin of Safety
05:37 4. Return on Assets
06:57 5. War with China
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What about long term investors of Workhorse and Bluberry?
Great video! Clearly the company is cheap on mant metrics. Just wanted to clarify one thing. If your margin of safety is zero, wouldn't that mean your annual return would be your discount rate (like 5%), rather than actually zero?
It means you buy it for 20 dollars, then every year for 10 years it makes you $1 profit, then you sell it for $10, thus you made $10 and sold for $10 = $20. Its a rough guide to tie the share price to the FCF and get a sense of intrinsic value. All great stocks are expensive to their current FCF, because growth is priced in, the question is how much growth is priced in?
Ali cloud , AI and ACID may get a significantly rise on Q3rd
also will finished primary listing on HK exchange on Aug 2024, it mean the money of china can buy this stock finally
so, the next three to six months maybe the trigger point
They also have a monopoly in China because China - 100% understandably - doesn't want US companies spying on its citizens. This is probably because China knows how much the US spies on its own citizens 😅
I think the trigger point will be earnings. If you are wealthy, the value of a share price is based on the risk and quantity of its earnings. It's about how much you can leverage against the earnings to acquire debt. If your stock earns $10 and has done so for 5 years, you can reliably borrow $100 against it. But if its 5-year EPS is $2, $4, $6, $5, $10, even though it has clear growth, its reliable borrowing power is far less. Only 5 years ago it was earning $2. I think a lot of people miss this.
Due to the pandemic, BABA's 'reliable' income, the amount you can borrow against, has been hit hard. But even with shockingly small growth, the amount you can borrow relative to the equity will increase very fast.
This is why stocks can drop in earnings and go up in price. To give a crude example, if a stock goes from earning $2, $4, $6, $5, $10 over 5 years to $4, $6, $5, $10, $8, the 5-year EPS has stayed the same but its weakest year is now $4, not $2. This will lower their Moody's risk score and allow you to borrow more money at a cheaper rate against the same exact 5-year average earnings per share.
@@moneytalksbyhjgwhiteaccidentally left the first part in mate? 😂
@@lilcolder lol at least you could see I only use it for typos and sentence structure haha I used to go back and read old comments of mine and be like... what?
@@moneytalksbyhjgwhitethe inverse is true regarding their monopoly. Their cloud / tech segments will never expand in any major markets outside of China.
would love more videos on Baba
On it 🫡
Im a buyer at $50.
You are a legend
What do you make of the $5 billion convertible bonds sale to fund its share buy-backs when it already has a huge cash pile?
Will make a video on this. My take without doing any research - the shares that are truly cheap are the ones held in USD. The outside markets are the ones going CHINA SCARY TAKE MY STOCK. BABA therefore want to buy the shares in USD and their cash reserves are in CNY, possibly tied into high rate bonds also. To buy back $5b of the USD shares they’d need to first convert $5b of CNY, this could crash the value of the CNY.
US markets don’t have this issue and it’s another case for a world reserve currency of some kind - like BTC - to create a level playing field.
In short, instead of converting 5b in shares, they sell $5b in contracts to buy shares at 30% above this current price in 5 years. A good deal. Perhaps they even buy these contracts back at a later date, but it means they get the USD without converting CNY.
People forget that converting currency is more like buying a house for these guys, they actually have to shop around the market for someone with the supply.
I hadn't thought of it like that, really interesting, looking forward the video.
I hope you’re right on this one! I can’t deny the value. Plus burry and the late Charlie munger agree. China may outperform the US in the next decade. Their automotive tech is already ahead of ours. Will you also do a video on Bidu?
Don't get your hopes up too high, spread your bets. I've got my money in both the UK and US, and then there's BTC and ETH which are kinda global. This stock is dirt cheap, so I don't think you need more than 10% of your portfolio for some serious gains.
I've been thinking about doing videos on other Chinese stocks, but man, it takes me forever to really get the story of the business.
Like with Amazon, you can't just know about the Free Cash Flow (FCF). You need to understand the whole journey of Amazon Web Services (AWS), which is where most of their FCF has come from in the last decade and has been funding Amazon.com. AWS has a high Return on Assets (ROA) but is losing market share because of the competition, like I mentioned in the video.
I wasn't a fan of Amazon.com business because it's retail. Retail/Amazon.com gets hit hard a lot even though people think 'who's competing with Amazon.com'. The answer is everyone. Companies can ship directly, people can hit up local stores (like COSTCO), or they can just buy less stuff they don't need, or they can drop their Amazon Prime subscription, or they can run out of new customers/markets to grow.
But still, the amount of cash and tech they've got makes them tough to compete with. Other tech giants like Google and Microsoft probably won't enter a market with such low return on equity. So, while the income might be a bit up and down, it still has a higher competitive advantage.
That's the kind of understanding I'd need to get into on BIDU, but it keeps showing up in all my value screeners so maybe I'll give it some time one day.
Some people say that the large cash reserves Alibaba has is at the mercy of the CCP/Chinese government and that’s why they have recently borrowed money. What’s your take on this one?
@@MarbledKing From what I know, the CCP isn't allowing Alibaba to convert Yuan to USD as this would crash the currency. The convertible bond sale delays converting Yuan to USD. Another benefit from the bond sale is that the US dollar is very strong right now, so the conversion rate is not ideal currently.
I loved the take on this, baba is also one of my biggest positions, the bad news around the stock seems overblown. One thing you didn’t discuss is the new management, I really like the new management and joe Tsai becoming a more prominent speaker gives me more hope as well.
thanks so much, I find it interesting there are people using a million models to justify amazon when stocks of such deep value exist
@@moneytalksbyhjgwhite Amazon does have deep moats in american e-commerce and aws, so it is an understandable investment. On the surface it's understandable that baba has dropped so far due to regulatory issues, zero covid policy, and the risk of war, causing significant slowing in growth. but people don't understand that there is new management, and they are in a strong position to take advantage of growing chinese middle class. Regulatory issues and zero covid seem to be relics of the past now and the risk of war seems unlikely, and I think baba will flourish either way.
Hi any adv also on Meituan target tq
sorry not sure on the question being asked?
@@moneytalksbyhjgwhite what u think of Meituan shares tq
The difference wirh Volkswagen, is if something bad happened you would still be an owner of that business.
With baba you never are an owner firstly, but that ADR contract will ge gone.
Look what happened to foreign investors in russia
I am an investor in a Russian business and I still hold my Russian shares, I just can't sell them. Russia have no issue with westerners investing, its the west that has an issue with me investing in Russia. My government can screw me no matter what ownership I have. That said, China are set to be the new world super power, While Russia's economy is closer to North Korea's than China's, so the two don't compare.
I made large positions in Alibaba also.
So did Alibaba, which is a good sign!
1. I don't think it's right to substract just cash out of market cap. You still have current liabilities of ~50B on avarage, that gives you just 30B cash available. 2. That margin of safety that you talk about doesn't include the ownership structure. China doesn't approve foreign ownership so you own the company through a lot of shell companies. There is a tiny risk that the Chinese government will stop that, leaving you without any money whatsoever. So, you have a double 'black swan' risk. The markets can crash wiping out your money, or geopolitical tensions might rise, wiping out your money (see people who have lost everything on cheap Russian stocks).
3. You are using a 10% yearly growth rate, but if you think about it as a tech company then it's growth might depend on the availability of foreign chips (think AI), also, tech companies can become obsolete quite quickly if/when someone takes them by surprise and steals their market share with a better product. I haven't done the full research, but I don't know if Alibaba has any addictive products (think Meta with social media) or what other kind of moat they have. I think the negative scenario is to assume negative growth and see how much negative yearly growth it can handle and if you would still not lose money. (By comparison, WBD has a market cap around 3 times it's free cash flow, meaning that even if things go poorly and they make just half the money you are still getting a bargain)
1. If you are bringing liabilities into this, you need to bring assets into it. Assets = $244b. $244-$50b= an additional $194b. 2. The margin of safety is a calc on its FCF assuming we still own the stock in 10 years. CCP ownership structure is a seperate point altogether. But its a thin argument, China have proven to be supportive of capital markets except when they deploy monopolistic tactics, which the west is just as agressive towards. All those other risks you mention effect US and UK stocks too, they arent unique to China.
You shouldn't compare all assets. If you use current assets you have to deduct current liabilities, you still have to pay your bills. All assets are a moot point. They might be worth 200B today, 100B next year and 10B in 2-3 years. The tech sector can be brutal with the current technological advances. And lastly, you own US or UK equities outright, not through a complicated shell company. Also, they are our geopolitical allies. I don't deny you can have better returns in China, but there's a slim chance you might lose all your money. Still, that slim chance is way way bigger than US turning against Europe at the moment
another dude who got scam by chinese stock😢
I specifically only wanted it at these prices, the people who got 'scammed' bought at 300
Baba is a scam
if you want to say stuff like this, say why
500 billion in market cap vanished! In 2020 it had a moat of 500$ value of 1000 per share? So wtf happend
@@mitch8575 Covid, then the war in Ukraine. Everything that made the business great is still there, but a lot of investors got scared and ran off. This is the definition of value investing. Buying amazing assets but at discount prices.
Your home is in the wrong part of the neighborhood lol nicest house in the hood. You are in an echo chamber
My portfolio is up 24% this year. I have over doubled the S&P since I began investing 10 years ago and you can see that for yourself on EToro and bullaware .com. I’m not saying this to brag, but I’ve gotten used to people using ‘echo chamber’ wrong. There’s an echo chamber that baba is good, and there is one that china or holding companies are bad. What I’ve done is I’ve listened to the china is a bad place to do business arguments and decided they are weak. But we won’t know until the stock is up or China cracks down