Alibaba Group Holding (BABA)

Chinese reopening didn't happen as planned. Gets traction, and then the government pulls the wheels out from under, that's an overhang. He sold in Q1, too much geopolitical stuff. Lots going for it, but almost back at IPO price.

He can't recommend any Chinese stocks.

He added more shares of BABA today. It's an underrated grower at a reasonable price. It's a turnaround story reflecting the revival of the Chinese consumer. They dominant e-commerce in China, their cloud business is overlooked and cash flow yield is in the mid-teens. Trades at a 30% discount to its historic average.

With Chinese stocks, must be careful of the political overhang. Government can get involved and impact the share price. 200-day MA is flat, share price trading below significant metrics. Cheap at 8.2x forward PE, but big risk.

A trade only, but would buy no Chinese stocks, because they've been a disaster.

The question was on his preference between the two companies, Alibaba didn't get traction and there has been a disconnect between their numbers and the stock price. He prefers Amazon.

He bought it because tensions eased between Beijing and the Chinese tech companies and that BABA would spin off parts of its business. But that latter got stuck in red tape. The overall business continues to thrive. Earnings are growing 18%. Trades at a low 9x PE, and likes that. It remains the dominant e-player in China, their Amazon, and gen-AI will help grow their cloud business. The market has soured on all Chinese stocks given geopolitical tensions, and the Chinese reopening has been slower than expected.

He just sold it. He thinks shares are popping today, because BABA will spin off one of their companies, not so much this report. He bought it at 8x earnings. He sold to manage his portfolio and feels that China's Premier is off the rails, not making good decisions like blockading Taiwan.

Likes it. BABA is relatively cheap at 10x, a discount to its historic average and a 40% discount to China's tech sector, despite the political risks. They hold 50% of market share and touches 70% of the Chinese population. 

Just bought Skyworks and Alibaba. China is a great contrary play, and BABA is cheap. Skyworks is in every smart phone in the world, and they've been re-rated 50%. They boast attractive demographics and valuation. 

Look past the headline noise (of Biden criticizing the Chinese economy) and instead focus on the fundamentals. China's government need to stimulate their economy. BABA is doing well without stimulus, reporting 16% growth. He expects growth to continue.

They have many levers they can pull. They can spin out their retail operation or cloud. That's why he likes it, despite challenges in the Chinese economy (high youth unemployment, slowing growth).

He won't invest in China's ADR, because he's uncomfortable with their set-up. He fears political interference from Beijing. He has exposure to China, but through companies based outside China

Unsure on direction of business due to lack in transparency in China.
At mercy of Chinese government.
Strong business but comes with political risk.
China hard to analyze.

The question was on his preference re buying Ali Baba or Amazon. He prefers Amazon since it is in the U.S. and Ali Baba is in China which has more fraudulent companies. Also Ali Baba has a lot of competition and Amazon has little competition. Profitability is quite spotty with BABA but also can be spotty with Amazon.