03-23-2022, 02:07 AM
Alibaba Stock the Steal of a Lifetime?
<!-- SC_OFF --><div class="md"><p>We all know Alibaba. The controversial Chinese company that has been beaten down all the way from $320 (Oct 16, 2020) to all the way up to $73.28 (March 15, 2022).</p> <p>From Ant Financial to Jack Ma's disappearance to delisting issues to Chinese tech crackdowns and so on. Many of which did actually permanently change the health of the company itself.</p> <p>However, it seems much of the more recent price drops have been due to fears that came out to be untrue.</p> <p>​</p> <p>The biggest price drops in the recent year has been due to:</p> <ol> <li>Delisting fears</li> <li>Unending Chinese tech regulations</li> <li>Trust of the entire VIE structure</li> </ol> <p>It seems all of those are coming to be just that: fears.</p> <p><strong>0. Fundamentals At A Glance</strong></p> <p>I have no idea why this stock traded at $73 at one point (~200 billion market cap) when the cash position alone is worth over a third of the market cap and its earnings are 22+ billion in a normal year. The company is still growing (albeit much less in % than it used to [makes sense given how big the company is]) and a money printing machine. Sure its margins are lowering due to investments in lower cost communities in China but that just means more profits long term. This company is a true cash machine.</p> <p><strong>1. Delisting fears</strong></p> <p>First of all, delisting does not mean the stock will go to zero. This might come off as a surprise to some people but with a reputable brokerage, you can exchange your 1 BABA shares to 8 XHKG:9988 shares. And you can vote with those 9988 shares.</p> <p>Unless you suddenly came into the belief that China will nationalize all its stock exchange AND un-employ millions of Chinese grads who majored in finance/econ/etc., this idea is just baffling. Especially when China has been opening more stock exchanges recently: <a href="https://en.wikipedia.org/wiki/Beijing_Stock_Exchange">Beijing Stock Exchange</a> has opened just end of last year.</p> <p>China has actually been taking steps the past year to support the concept of the stock market. And it seems Evergrande has been a life saving event for stock holders. The Evergrande fiasco has been one of the biggest bull cases for the Chinese govt to support the stock market as the place of investments for the younger generation over real estate. <a href="https://www.bloomberg.com/news/articles/2022-03-16/chinese-stocks-in-the-u-s-surge-after-promise-of-state-support">Chinese stocks in surge after promise of state support</a></p> <p>As of actual delisting fears, all the commentaries from the Chinese side has been very bullish despite Bloomberg constantly claiming otherwise.</p> <p>This year, the Chinese Govt has FINALLY made it public. Chinese tech stocks like Alibaba will BE allowed audits from the US. This is huge. Not only does this imply the accounting is credible for some of these big names, but it also means the entire delisting fear is just one big political play. <a href="https://www.ft.com/content/0463c70d-4d24-4b9b-b7e5-ace22409d8e2">China plans audit concession</a></p> <p>So the entire 'delisting' issue should be off now. The very issue that has crashed majority of the value in Alibaba share price.</p> <p>​</p> <p><strong>2. Unending Chinese tech regulations</strong></p> <p>China has been different from the US in the tech market in that China opened its tech market with basically no laws. US on the other hand has laws in place ahead of time and then lets the companies compete.</p> <p>And if are an East Asian, you would be well aware how toxic the private education industry has been to the people and how exploitive some of these tech giants have been becoming. Alibaba for instance with AlliPay was basically playing around with exploiting the poor with loans to make profit. In the US, none of that would have happened. China however has been a developing nation and is finally starting to put rules in place for what tech should and shouldn't do.</p> <p>All this led to fears of whether the Chinese Party hates the entire Chinese Tech industry or not. The crackdown seemed to be unending. Did China just hate all of big tech?</p> <p>Well, the answer is now clear. The big tech regulation is ending. </p> <p>In October 2021, China hinted the crackdown for big tech was coming to an end: <a href="https://www.bloomberg.com/news/articles/2021-10-22/china-s-top-financial-regulator-sees-progress-in-tech-crackdown">news</a></p> <p>Very recently (last week), China officially declared tech crackdown was at closure: <a href="https://www.cnbc.com/2022/03/16/china-says-it-will-support-chinese-ipos-abroad-calls-for-closure-on-tech-crackdown.html">news</a></p> <p>In fact, that news evidences China is supporting Chinese IPOs abroad on top too.</p> <p>In other words, the entire big tech regulation fear is ending.</p> <p>​</p> <p><strong>3. Trust of the entire VIE structure</strong></p> <p>The ambiguity of the entire VIE structure and whether the Chinese govt would support it has been a huge "?" to the foreign investors for some time now.</p> <p>Are VIE structure investing legit?</p> <p>Well on end of December of 2021 (during Christmas time), China finally announced the verdict. VIE structures are a LEGITIMATE form of investing in Chinese firms. <a href="https://realmoney.thestreet.com/investing/global-equity/china-tightens-loophole-for-companies-listing-abroad-15871357">VIE support</a></p> <p>So that fear is entirely misplaced as now there's clarifications. All those decades of investors placing a discount on Chinese stocks BECAUSE of VIE structure should have been solved end of last year.</p> <p>​</p> <p><strong>Bull information to consider</strong></p> <p>The Chinese government has been proactively BUYING Chinese stocks since end of last year. Chinese firms have been proactively BUYING its own shares since end of last year.</p> <p>Last time China endorsed its own companies to do buybacks proactively was the bottom of the financial crisis.</p> <p>Alibaba has upped its share repurchase program to <a href="https://www.msn.com/en-us/money/topstocks/alibaba-rises-as-much-as-11-after-the-chinese-e-commerce-giant-lifts-its-share-buyback-program-to-25-billion/ar-AAVlVV4?ocid=BingNewsSearch">$25 billion</a> claiming the price was not justifying the value of the company.</p> <p>Why is it all the foreign investors in US are running away from Chinese stocks while both the Chinese government and the Chinese firms are throwing tens of billions at the Chinese stocks? Maybe just maybe the entire fear has been misplaced and the Western Media has been grossly overexaggerating all this?</p> <p>And of course, it helps figureheads like Charlie Munger is also bullish on the stock and puts money where his mouth is. The financials of this company is phenomenal. It's a cash machine even without the growth story.</p> <p>With the past 2 years of downturn, Alibaba shares have been more and more owned by Chinese investors. Add on with the buybacks, Alibaba shares will soon be traded by Chinese natives through Stock Connect. As of now (and in the past), Alibaba shares weren't traded by Chinese natives. That rule can soon change (in fact, the new buyback program alone is more than enough) as at least 55% of the company would now be traded in Hong Kong going forward. How is that not bullish? Alibaba stocks will soon be traded by BOTH foreigners AND domestic holders!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Fwellimort"> /u/Fwellimort </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tk3mvm/alibaba_stock_the_steal_of_a_lifetime/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tk3mvm/alibaba_stock_the_steal_of_a_lifetime/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>We all know Alibaba. The controversial Chinese company that has been beaten down all the way from $320 (Oct 16, 2020) to all the way up to $73.28 (March 15, 2022).</p> <p>From Ant Financial to Jack Ma's disappearance to delisting issues to Chinese tech crackdowns and so on. Many of which did actually permanently change the health of the company itself.</p> <p>However, it seems much of the more recent price drops have been due to fears that came out to be untrue.</p> <p>​</p> <p>The biggest price drops in the recent year has been due to:</p> <ol> <li>Delisting fears</li> <li>Unending Chinese tech regulations</li> <li>Trust of the entire VIE structure</li> </ol> <p>It seems all of those are coming to be just that: fears.</p> <p><strong>0. Fundamentals At A Glance</strong></p> <p>I have no idea why this stock traded at $73 at one point (~200 billion market cap) when the cash position alone is worth over a third of the market cap and its earnings are 22+ billion in a normal year. The company is still growing (albeit much less in % than it used to [makes sense given how big the company is]) and a money printing machine. Sure its margins are lowering due to investments in lower cost communities in China but that just means more profits long term. This company is a true cash machine.</p> <p><strong>1. Delisting fears</strong></p> <p>First of all, delisting does not mean the stock will go to zero. This might come off as a surprise to some people but with a reputable brokerage, you can exchange your 1 BABA shares to 8 XHKG:9988 shares. And you can vote with those 9988 shares.</p> <p>Unless you suddenly came into the belief that China will nationalize all its stock exchange AND un-employ millions of Chinese grads who majored in finance/econ/etc., this idea is just baffling. Especially when China has been opening more stock exchanges recently: <a href="https://en.wikipedia.org/wiki/Beijing_Stock_Exchange">Beijing Stock Exchange</a> has opened just end of last year.</p> <p>China has actually been taking steps the past year to support the concept of the stock market. And it seems Evergrande has been a life saving event for stock holders. The Evergrande fiasco has been one of the biggest bull cases for the Chinese govt to support the stock market as the place of investments for the younger generation over real estate. <a href="https://www.bloomberg.com/news/articles/2022-03-16/chinese-stocks-in-the-u-s-surge-after-promise-of-state-support">Chinese stocks in surge after promise of state support</a></p> <p>As of actual delisting fears, all the commentaries from the Chinese side has been very bullish despite Bloomberg constantly claiming otherwise.</p> <p>This year, the Chinese Govt has FINALLY made it public. Chinese tech stocks like Alibaba will BE allowed audits from the US. This is huge. Not only does this imply the accounting is credible for some of these big names, but it also means the entire delisting fear is just one big political play. <a href="https://www.ft.com/content/0463c70d-4d24-4b9b-b7e5-ace22409d8e2">China plans audit concession</a></p> <p>So the entire 'delisting' issue should be off now. The very issue that has crashed majority of the value in Alibaba share price.</p> <p>​</p> <p><strong>2. Unending Chinese tech regulations</strong></p> <p>China has been different from the US in the tech market in that China opened its tech market with basically no laws. US on the other hand has laws in place ahead of time and then lets the companies compete.</p> <p>And if are an East Asian, you would be well aware how toxic the private education industry has been to the people and how exploitive some of these tech giants have been becoming. Alibaba for instance with AlliPay was basically playing around with exploiting the poor with loans to make profit. In the US, none of that would have happened. China however has been a developing nation and is finally starting to put rules in place for what tech should and shouldn't do.</p> <p>All this led to fears of whether the Chinese Party hates the entire Chinese Tech industry or not. The crackdown seemed to be unending. Did China just hate all of big tech?</p> <p>Well, the answer is now clear. The big tech regulation is ending. </p> <p>In October 2021, China hinted the crackdown for big tech was coming to an end: <a href="https://www.bloomberg.com/news/articles/2021-10-22/china-s-top-financial-regulator-sees-progress-in-tech-crackdown">news</a></p> <p>Very recently (last week), China officially declared tech crackdown was at closure: <a href="https://www.cnbc.com/2022/03/16/china-says-it-will-support-chinese-ipos-abroad-calls-for-closure-on-tech-crackdown.html">news</a></p> <p>In fact, that news evidences China is supporting Chinese IPOs abroad on top too.</p> <p>In other words, the entire big tech regulation fear is ending.</p> <p>​</p> <p><strong>3. Trust of the entire VIE structure</strong></p> <p>The ambiguity of the entire VIE structure and whether the Chinese govt would support it has been a huge "?" to the foreign investors for some time now.</p> <p>Are VIE structure investing legit?</p> <p>Well on end of December of 2021 (during Christmas time), China finally announced the verdict. VIE structures are a LEGITIMATE form of investing in Chinese firms. <a href="https://realmoney.thestreet.com/investing/global-equity/china-tightens-loophole-for-companies-listing-abroad-15871357">VIE support</a></p> <p>So that fear is entirely misplaced as now there's clarifications. All those decades of investors placing a discount on Chinese stocks BECAUSE of VIE structure should have been solved end of last year.</p> <p>​</p> <p><strong>Bull information to consider</strong></p> <p>The Chinese government has been proactively BUYING Chinese stocks since end of last year. Chinese firms have been proactively BUYING its own shares since end of last year.</p> <p>Last time China endorsed its own companies to do buybacks proactively was the bottom of the financial crisis.</p> <p>Alibaba has upped its share repurchase program to <a href="https://www.msn.com/en-us/money/topstocks/alibaba-rises-as-much-as-11-after-the-chinese-e-commerce-giant-lifts-its-share-buyback-program-to-25-billion/ar-AAVlVV4?ocid=BingNewsSearch">$25 billion</a> claiming the price was not justifying the value of the company.</p> <p>Why is it all the foreign investors in US are running away from Chinese stocks while both the Chinese government and the Chinese firms are throwing tens of billions at the Chinese stocks? Maybe just maybe the entire fear has been misplaced and the Western Media has been grossly overexaggerating all this?</p> <p>And of course, it helps figureheads like Charlie Munger is also bullish on the stock and puts money where his mouth is. The financials of this company is phenomenal. It's a cash machine even without the growth story.</p> <p>With the past 2 years of downturn, Alibaba shares have been more and more owned by Chinese investors. Add on with the buybacks, Alibaba shares will soon be traded by Chinese natives through Stock Connect. As of now (and in the past), Alibaba shares weren't traded by Chinese natives. That rule can soon change (in fact, the new buyback program alone is more than enough) as at least 55% of the company would now be traded in Hong Kong going forward. How is that not bullish? Alibaba stocks will soon be traded by BOTH foreigners AND domestic holders!</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Fwellimort"> /u/Fwellimort </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tk3mvm/alibaba_stock_the_steal_of_a_lifetime/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tk3mvm/alibaba_stock_the_steal_of_a_lifetime/">[comments]</a></span>Kind Regards R