Alibaba

[ksir]

This Baba is getting more & more like a deep value or value trap if you wish.
Latest Quarter Financial numbers:
https://data.alibabagroup.com/ecms-files...esults.pdf

At current price of $78, its market cap is about $200B.
It has $63B net cash (cash + treasury - Bank loans - Notes) or over 30% fo market cap.
Its latest quarter:
* FCF is $6B, half year FCF is $11B.
* Non-GAAP net income attributable to ordinary shareholders is about $6B or $5B as I prefer to minus off the Share-based compensation expense.

This kind of valuation, I'd be happy to keep it company!
China Gov got no choice but to support them otherwise how to hike up the depressed economy and people mood.
It takes times to build up people confidence after you have depressed it.

Am very curious to revisit this after 2-3 years.

[Ben]

China Gov got no choice but to support them otherwise how to hike up the depressed economy and people mood.

China govt are not stupid. They surely know the consequences when they went after Alibaba few years ago. In fact, many big tech in China were targeted despite the obvious repercussions. Yet, China govt went ahead to do it. You have to ask yourself why? 

I will refrain from sharing my personal views on this as it will becomes a sensitive political narrative. But, what I am trying to say is, a country political stability or climate is vital to the growth/downfall of its companies, be it big or small now.

[ksir]

China Gov got no choice but to support them otherwise how to hike up the depressed economy and people mood.

China govt are not stupid. They surely know the consequences when they went after Alibaba few years ago. In fact, many big tech in China were targeted despite the obvious repercussions. Yet, China govt went ahead to do it. You have to ask yourself why? 

I will refrain from sharing my personal views on this as it will becomes a sensitive political narrative. But, what I am trying to say is, a country political stability or climate is vital to the growth/downfall of its companies, be it big or small now.

I never say they are stupid and never imply any political narrative. haha. strange how this is being interpreted as such. 

When things are running wild and economy seems to running good, it's not a problem to want to control them, but as usual, it tends to go too extreme. In this case, the big tech companies cracked down and extremely affected the confidence of the stakeholders.
Now that they realized, oh shix, what have we done, they have tried and trying to gain the favor and confidence back.

I'm willing to take the contradictory view on the extreme pessimism on China, I bet on Alibaba, Tencent & NetEase and confident the return for next few years would be satisfactory.

We shall see.

[Ben]

 I never say they are stupid and never imply any political narrative. haha. strange how this is being interpreted as such. 

I am just sharing my personal view on the political climate in China, and not interpreting what you have said.

Alibaba and Tencent are big companies run by smart people. I also wish the operating environment can be more business friendly to them.

Wish you well.

[weijian]

Dear Ben,

It would be good to refrain from using non-neutral words like "s****d". I am sure this helps to facilitate the exchange of views on VB.com

With regards to the politics of China, I wonder if most of us (me inclusive) truly have a good understanding/appreciation, especially if most of us have not done business or lived half their adult lives over there? Personally, I have found myself overestimating my true understanding of China, all thanks to biases and laziness. I am trying to change that, by reading up a variety of primary sources, rather than depending on new articles and opinions.

On another note, recently there was an eye-raising article published by The Good Investors which stated a fact that MSCI China returned 0% over 30years in USD terms. There is a simple conclusion that the author wants to deliver with this "0%" but obviously, that is just 1 conclusion that is convenient for readers to take away. Looking closer at the chart and dwelling further, there are probably more lessons to be learnt, isn't it?

Mind The Gap
A favourable macroeconomic trend does not necessarily mean a company’s business – and hence stock – will do well.
https://www.thegoodinvestors.sg/mind-the-gap/

P.S. how can the operating environment be "non friendly" to them as their political masters have a helping hand to restrict/ban their foreign competitors. As the saying goes, you live by the sword, you die by it!

[ksir]

Dear Ben,

It would be good to refrain from using non-neutral words like "s****d". I am sure this helps to facilitate the exchange of views on VB.com

With regards to the politics of China, I wonder if most of us (me inclusive) truly have a good understanding/appreciation, especially if most of us have not done business or lived half their adult lives over there? Personally, I have found myself overestimating my true understanding of China, all thanks to biases and laziness. I am trying to change that, by reading up a variety of primary sources, rather than depending on new articles and opinions.

On another note, recently there was an eye-raising article published by The Good Investors which stated a fact that MSCI China returned 0% over 30years in USD terms. There is a simple conclusion that the author wants to deliver with this "0%" but obviously, that is just 1 conclusion that is convenient for readers to take away. Looking closer at the chart and dwelling further, there are probably more lessons to be learnt, isn't it?

Mind The Gap
A favourable macroeconomic trend does not necessarily mean a company’s business – and hence stock – will do well.
https://www.thegoodinvestors.sg/mind-the-gap/

P.S. how can the operating environment be "non friendly" to them as their political masters have a helping hand to restrict/ban their foreign competitors. As the saying goes, you live by the sword, you die by it!

I definitely agree with you on overestimating our ability to understand China. I tried to avoid that bias by reading more writing from China Wechat official accounts that I explored and followed (mostly value investors and their logic and more rational debates are outstanding).
Of course I also read writings on the other side (western mostly) but harder to find those with rational reasoning but more on sentiments.
Of course china has its ton of problems, but when everyone seem to agree it is no investable, it is, imho, the best way to shoot in the barrel. 
Definitely i could be totally wrong and their problem is not ending soon, but considering risk & reward, I'd bite the bulletS

[specuvestor]

On another note, recently there was an eye-raising article published by The Good Investors which stated a fact that MSCI China returned 0% over 30years in USD terms. There is a simple conclusion that the author wants to deliver with this "0%" but obviously, that is just 1 conclusion that is convenient for readers to take away. Looking closer at the chart and dwelling further, there are probably more lessons to be learnt, isn't it?

Mind The Gap
A favourable macroeconomic trend does not necessarily mean a company’s business – and hence stock – will do well.
https://www.thegoodinvestors.sg/mind-the-gap/

P.S. how can the operating environment be "non friendly" to them as their political masters have a helping hand to restrict/ban their foreign competitors. As the saying goes, you live by the sword, you die by it!

Dec 2001 China was admitted to WTO. The subsequent few years China was on a bull market as stocks from banks to telcos got listed including the red chips and H-shares. Context is always important when deciphering statistics. In 20 years time people looking at 2020 chart might not realise there was a COVID

As usual equity return is very sensitive to timeline and you can change it to suit whatever narrative you want

[Ben]

Dear Ben,

It would be good to refrain from using non-neutral words like "s****d". I am sure this helps to facilitate the exchange of views on VB.com

With regards to the politics of China, I wonder if most of us (me inclusive) truly have a good understanding/appreciation, especially if most of us have not done business or lived half their adult lives over there? Personally, I have found myself overestimating my true understanding of China, all thanks to biases and laziness. I am trying to change that, by reading up a variety of primary sources, rather than depending on new articles and opinions.

On another note, recently there was an eye-raising article published by The Good Investors which stated a fact that MSCI China returned 0% over 30years in USD terms. There is a simple conclusion that the author wants to deliver with this "0%" but obviously, that is just 1 conclusion that is convenient for readers to take away. Looking closer at the chart and dwelling further, there are probably more lessons to be learnt, isn't it?

Mind The Gap
A favourable macroeconomic trend does not necessarily mean a company’s business – and hence stock – will do well.
https://www.thegoodinvestors.sg/mind-the-gap/

P.S. how can the operating environment be "non friendly" to them as their political masters have a helping hand to restrict/ban their foreign competitors. As the saying goes, you live by the sword, you die by it!

Hi Weijian! Noted your point of the usage of non-neutral words. I was probably too eager to share my views and too fast in writing without serious consideration of the choice of words, but certainly, there is no ill intention.

I have to confess that I am biased against current China political system. This is based on what I read/heard from the media, and also from interaction with people I personally know, a few were from China/HK. Of course, I do not have a good understanding of China and its system. That is why I want to refrain from sharing my view too much, as it may not be balance or the complete truth.

As to the topic of operating environment friendless, while the system has restriction imposed on foreign competitions to ensue its homegrowns can flourish, and it seems to be working as we can see quite a few giants emerging in China. OTOH, we can also see quite a few giants have been “disciplined” by their political master in recent years.

To hazard a wild guess, does that means the master wants her homegrowns to grow big but not too big to the extend it is beyond their control? Again, this is just a wild guess and probably only time will tell.

[weijian]

@ksir,
I am outdated with following "fellow Wechat accounts" and more towards reading historical accounts. eg. currently trying to appreciate more on post WW2 China via Frank Dikotter's trilogy books.

@specuvestor,
1992 (starting point of the graph) was when Deng made his Southern tour and invited reform (and foreign capital) post Tian-anmen. Every guai-lo who was waiting for the invitation, jumped all-in, spent both time and capital to learn that yangtze crocs can be your comrade today but competitor tomorrow. And they do not conform to western governance ways. And there we have it - Market works in cycles and reverses each time after hitting extremes.

@Ben,
Surely all old VBs know you mean no ill
When talking up a stranger at the bar, Charles Ponzi loves to fish out the stranger's political views in the 1st few mins by acting neutral, and then spend the next few agreeing with him. And he's got the stranger's trust after 10 mins.
Every big honcho clearly see where is the red line and will never cross it. Furthermore, most of them are breaking up (eg. Tencent and Alibaba) and so things should be getting better. Of course, better is relative to previous situation and not to other markets.

[specuvestor]

@specuvestor,
1992 (starting point of the graph) was when Deng made his Southern tour and invited reform (and foreign capital) post Tian-anmen. Every guai-lo who was waiting for the invitation, jumped all-in, spent both time and capital to learn that yangtze crocs can be your comrade today but competitor tomorrow. And they do not conform to western governance ways. And there we have it - Market works in cycles and reverses each time after hitting extremes.

Just saying the guai-lo included SIP
https://en.wikipedia.org/wiki/Suzhou_Industrial_Park

The first ten years was actually super tough with broken infrastructure and incomplete legal system. SIP experience was actually not uncommon. Those were the days if you have RMB10k 万元户 you are considered rich. No prizes for guessing the consumer prowess then. Baba couldn't have thrived in that environment. 前人栽树。。。

Then 2 July 1997 THB delinked and AFC started