So...When Will the Tencent Bubble Burst?

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sawyer_sully
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So...When Will the Tencent Bubble Burst?

Post by sawyer_sully »

Two giants in the "emerging markets" category are Alibaba and Tencent, they have both experienced unprecedented growth, and relatively positive feedback from investors and the media.

To be completely honest, the fast-paced growth of these firms got me very excited, but then I took a look at the PE ratios. Tencent has a PE ratio of over 57 and Alibaba over 52!!

Does anyone else find this sketchy, would there be any sound reasoning behind such ungodly PE ratios. I believe the Chinese government could certainly play a role. Yet looking at Yahoo finance, there were predictions that Alibaba could rise another $100 over the next year. I do not understand how companies could be overvalued so heavily and sustain growth, or am I putting too much weight on PE ratios?
maylikesun
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Re: So...When Will the Tencent Bubble Burst?

Post by maylikesun »

well,if your 90 years old grandpa is using wechat (from Tencent) everyday and both of your retired parents are shopping on taobao every the other day, I will think >50 PE is not a big problem. Their market is HUGE.
youdiditr2
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Re: So...When Will the Tencent Bubble Burst?

Post by youdiditr2 »

Tencent controls everything in China. WeChat, video games, epayment.
drk
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Re: So...When Will the Tencent Bubble Burst?

Post by drk »

sawyer_sully wrote: Tue Jan 09, 2018 10:08 pm Two giants in the "emerging markets" category are Alibaba and Tencent, they have both experienced unprecedented growth, and relatively positive feedback from investors and the media.

To be completely honest, the fast-paced growth of these firms got me very excited, but then I took a look at the PE ratios. Tencent has a PE ratio of over 57 and Alibaba over 52!!

Does anyone else find this sketchy, would there be any sound reasoning behind such ungodly PE ratios. I believe the Chinese government could certainly play a role. Yet looking at Yahoo finance, there were predictions that Alibaba could rise another $100 over the next year. I do not understand how companies could be overvalued so heavily and sustain growth, or am I putting too much weight on PE ratios?
Have you seen Amazon's PE ratio?
fennewaldaj
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Re: So...When Will the Tencent Bubble Burst?

Post by fennewaldaj »

Yeah If I were to guess I would think Tencent is much more likley to justify its PE than amazon or netflix.
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whodidntante
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Re: So...When Will the Tencent Bubble Burst?

Post by whodidntante »

You could buy a value fund like FNDE if you want a quantitative screen for high flying growth stocks.
katon
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Re: So...When Will the Tencent Bubble Burst?

Post by katon »

youdiditr2 wrote: Tue Jan 09, 2018 10:34 pm Tencent controls everything in China. WeChat, video games, epayment.
maylikesun wrote: Tue Jan 09, 2018 10:20 pm well,if your 90 years old grandpa is using wechat (from Tencent) everyday and both of your retired parents are shopping on taobao every the other day, I will think >50 PE is not a big problem. Their market is HUGE.
fennewaldaj wrote: Wed Jan 10, 2018 12:00 am Yeah If I were to guess I would think Tencent is much more likley to justify its PE than amazon or netflix.
i am looking for opening a position in Tencent.
I want to tell that they pay a dividend for the last ~4-5 years, growing at a ~30% pace. I think this is very good and important thing. I know that the dividend yield is very low but no matter. Almost all the internet US stocks are not paying dividends except from Apple ..
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unclescrooge
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Re: So...When Will the Tencent Bubble Burst?

Post by unclescrooge »

If you think they're overvalued, you don't need to buy them.

That being said, I own ten cent as a distinct 1% allocation in my accounts and think it's a bargain.
katon
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Re: So...When Will the Tencent Bubble Burst?

Post by katon »

unclescrooge wrote: Mon Feb 26, 2018 1:52 am If you think they're overvalued, you don't need to buy them.

That being said, I own ten cent as a distinct 1% allocation in my accounts and think it's a bargain.
do you own the ADR ? or direct stock from China ?
naha66
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Re: So...When Will the Tencent Bubble Burst?

Post by naha66 »

drk wrote: Tue Jan 09, 2018 10:47 pm
sawyer_sully wrote: Tue Jan 09, 2018 10:08 pm Two giants in the "emerging markets" category are Alibaba and Tencent, they have both experienced unprecedented growth, and relatively positive feedback from investors and the media.

To be completely honest, the fast-paced growth of these firms got me very excited, but then I took a look at the PE ratios. Tencent has a PE ratio of over 57 and Alibaba over 52!!

Does anyone else find this sketchy, would there be any sound reasoning behind such ungodly PE ratios. I believe the Chinese government could certainly play a role. Yet looking at Yahoo finance, there were predictions that Alibaba could rise another $100 over the next year. I do not understand how companies could be overvalued so heavily and sustain growth, or am I putting too much weight on PE ratios?
Have you seen Amazon's PE ratio?
But do you think the US government would step in tomorrow and arrest their CEO like Anbang?
selters
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Re: So...When Will the Tencent Bubble Burst?

Post by selters »

sawyer_sully wrote: Tue Jan 09, 2018 10:08 pm Two giants in the "emerging markets" category are Alibaba and Tencent, they have both experienced unprecedented growth, and relatively positive feedback from investors and the media.

To be completely honest, the fast-paced growth of these firms got me very excited, but then I took a look at the PE ratios. Tencent has a PE ratio of over 57 and Alibaba over 52!!

Does anyone else find this sketchy, would there be any sound reasoning behind such ungodly PE ratios. I believe the Chinese government could certainly play a role. Yet looking at Yahoo finance, there were predictions that Alibaba could rise another $100 over the next year. I do not understand how companies could be overvalued so heavily and sustain growth, or am I putting too much weight on PE ratios?
When will the Amazon, Tesla and Netflix bubbles burst?
Their earnings multiples are in the hundreds. I don't know. Maybe they aren't bubbles.
z3r0c00l
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Re: So...When Will the Tencent Bubble Burst?

Post by z3r0c00l »

sawyer_sully wrote: Tue Jan 09, 2018 10:08 pm To be completely honest, the fast-paced growth of these firms got me very excited, but then I took a look at the PE ratios. Tencent has a PE ratio of over 57 and Alibaba over 52!!
P/E tells us little about the future performance of a stock, however I don't think these PE ratios are high at all for young companies. Amazon is at what, 330 right now? And it is one of the largest companies in the world and thus, one of the largest components of a US stock fund. Yet invest we must. Remember the E can and often does go up. No reason why the P has to drop for the ratio to hit historical norms.
david1082b
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Re: So...When Will the Tencent Bubble Burst?

Post by david1082b »

Google's PE in its early days was very high too, over 100 I think, but growth was good enough. I guess investors expect high growth for Tencent? Maybe their growth won't be enough to justify the PE, maybe it will.

This is from an article about Amazon in 2010 when Amazon was worth much less than now:
Whenever a stock can potentially drop 50% and still be considered overvalued, that’s when you know the stock is a bubble. Amazon far surpassed bubble territory ages ago but investors still continue to plunge billions of dollars into the company. If the stock were to crash to $80 a share today from $164, it would still be trading at a significantly richer valuation than Google, Apple or even Research in Motion (RIMM).

[snip]

There is no matter of ‘if’ in this analysis. It’s a matter of ‘when.’ Amazon will lose 50% of its value over the coming years. At $150-$160 a share, investors are flirting with financial suicide.
http://fortune.com/2010/10/22/the-amazi ... ck-bubble/

Of course, Amazon outperformed all those stocks after the article was published and RIMM disappeared completely. Calling bubbles correctly is difficult.
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unclescrooge
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Re: So...When Will the Tencent Bubble Burst?

Post by unclescrooge »

katon wrote: Mon Feb 26, 2018 2:50 am
unclescrooge wrote: Mon Feb 26, 2018 1:52 am If you think they're overvalued, you don't need to buy them.

That being said, I own ten cent as a distinct 1% allocation in my accounts and think it's a bargain.
do you own the ADR ? or direct stock from China ?
I buy the easiest way possible. ADR.
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