BABA and Tencent

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Swiss Bee
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BABA and Tencent

Post by Swiss Bee »

Any views on BABA and Tencent? I know that stock picking is bad :twisted: but I really want some opinions on loading them up for the long term? :moneybag :moneybag :dollar
whereskyle
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Re: BABA and Tencent

Post by whereskyle »

Bought a few shares of BABA during the crash in March 2020. Since then, holding it has been an absolute nightmare and it has underperformed the market significantly. I much prefer holding VT and VTI.
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fisher0815
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Re: BABA and Tencent

Post by fisher0815 »

This discussion is a good read for BABA: https://thecobf.com/forum/topic/10520-baba-alibaba/
This is also a nice overview, whats going on in china: https://www.forbes.com/sites/georgecalh ... 951414123a

If you find individual stocks like BABA or Tencent attractive, I think it would be a very smart move to buy a china index or EM index fund and hold it for a very long time. Whoever the victorious companies are in this opaque situation, you have them within the index.
theorist
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Re: BABA and Tencent

Post by theorist »

Swiss Bee wrote: Thu Jul 08, 2021 6:13 am Any views on BABA and Tencent? I know that stock picking is bad :twisted: but I really want some opinions on loading them up for the long term? :moneybag :moneybag :dollar
I put some money in BABA last spring. I hadn’t fully appreciated the magnitude of the risk from regulation on both the Chinese and US end. That risk has shown up, but my guess is that in the future, while navigating such risks, BABA and Tencent will continue to do well.

Still, I hold mostly well diversified index funds (for both my US and International allocations) because I don’t trust my opinion that much, and I don’t have any information that the institutional investors who are taking the other side of trades don’t also have :happy .
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anon_investor
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Re: BABA and Tencent

Post by anon_investor »

Swiss Bee wrote: Thu Jul 08, 2021 6:13 am Any views on BABA and Tencent? I know that stock picking is bad :twisted: but I really want some opinions on loading them up for the long term? :moneybag :moneybag :dollar
I would not. Buy VWO (Vanguard Emerging Market Index) if you like Chinese stocks, they make up 40% of that.
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nisiprius
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Re: BABA and Tencent

Post by nisiprius »

It is my personal opinion that if an investor who has not at least looked at the balance sheet in the annual reports, "read" that balance sheet, and reviewed the footnotes, then that investor should not invest in the individual stock of that company. Have you done that?

Can you name the CEOs of Alibaba and Tencent? (I can for Alibaba, but not Tencent).

I can't "read" a balance sheet. I once crammed Accounting 101 for a test I had to take, that had accounting as part of it, and for a few weeks I could probably have told you what a "quick ratio" is. Beyond that, I look at a balance sheet and my eyes glaze over and I see that the totals of both columns are exactly the same and say vaguely "well, that must be good." I have no idea what I'm doing with individual stocks. I never have and I never will.

You can't shortcut the process by reading a bunch of other peoples' confidently-expressed opinions and synthesizing them. If you pay attention you'll quickly find that there are diametrically opposed opinions. You can't turn a bad strategy into a good one by just putting the word "long-term" after it. Circa 1999 I don't think many people would have said "holding Amazon for the long term is a good idea but holding Webvan for the long term is a bad idea."

I own both Tencent and Alibaba. They are both in my holding of the Vanguard Total International Stock Market Index Fund. Tencent is 1.42% of my holding, Alibaba is 1.14%. I just shrug and accept that that's what the market thinks they are worth. Those two stocks together represent 1/40th of the value of all the international stocks in the world. So I have some, but it's a small enough commitment that if they crash I'll hardly notice any effect in my account.
Last edited by nisiprius on Thu Jul 08, 2021 6:46 am, edited 2 times in total.
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fisher0815
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Re: BABA and Tencent

Post by fisher0815 »

Regarding accounting, this is a nice read: http://www.deepthroatipo.com/alibaba-de ... q3-fy2021/
rutrow2015
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Re: BABA and Tencent

Post by rutrow2015 »

Full disclosure - I was buying BABA on it's first trading day and during the next several months until it my average cost was under $73/ share (remember it got down into the 60's during an early pull back). It was my only directly owned stock at the time but I had FOMO on the next amazon. Side note : I would have been way better off buying amazon even at that point when it's P/E was merely ridiculous.

Tuesday's press release regarding the CCP changing regulations to hamstring the VIE structure to force companies to list in Hong Kong finally put the issue to bed with me and I sold 80% of my original shares at around $210 yesterday. At one point BABA was 13% of my net worth. Now it's less than 2% as my other investments have grown and BABA has shrunk.

As others have said, BABA has been an exercise in frustration and it seems to me that there is no future for Chinese ADR's or VIE's. I suspect US investors will see the value of these 'shares' go to zero. I hope I'm wrong because I still hold some BABA. I also own some play shares in Tencent, JD.com and Baidu - all of which have been similarly frustrating. I'm actually underwater on those three and will probably use them for tax loss harvesting.

I'm building my emerging markets wedge but I'm doing it via VWO. Just like you can't fight the fed in the US, you can't fight the CCP in China.
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WingsFan4Life
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Re: BABA and Tencent

Post by WingsFan4Life »

I bought 8 BABA shares at $210 so maybe I bought some of yours :D

I sometimes like to take a little risk with the play money. It seems like BABA is beaten down with all the negative news so here's to it working out for me :beer

The CCP sucks, but my bet is investing in Chinese ADR/VIE will work out in the long run.

rutrow2015 wrote: Thu Jul 08, 2021 5:53 pm Full disclosure - I was buying BABA on it's first trading day and during the next several months until it my average cost was under $73/ share (remember it got down into the 60's during an early pull back). It was my only directly owned stock at the time but I had FOMO on the next amazon. Side note : I would have been way better off buying amazon even at that point when it's P/E was merely ridiculous.

Tuesday's press release regarding the CCP changing regulations to hamstring the VIE structure to force companies to list in Hong Kong finally put the issue to bed with me and I sold 80% of my original shares at around $210 yesterday. At one point BABA was 13% of my net worth. Now it's less than 2% as my other investments have grown and BABA has shrunk.

As others have said, BABA has been an exercise in frustration and it seems to me that there is no future for Chinese ADR's or VIE's. I suspect US investors will see the value of these 'shares' go to zero. I hope I'm wrong because I still hold some BABA. I also own some play shares in Tencent, JD.com and Baidu - all of which have been similarly frustrating. I'm actually underwater on those three and will probably use them for tax loss harvesting.

I'm building my emerging markets wedge but I'm doing it via VWO. Just like you can't fight the fed in the US, you can't fight the CCP in China.
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arcticpineapplecorp.
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Re: BABA and Tencent

Post by arcticpineapplecorp. »

Swiss Bee wrote: Thu Jul 08, 2021 6:13 am Any views on BABA and Tencent? I know that stock picking is bad :twisted: but I really want some opinions on loading them up for the long term? :moneybag :moneybag :dollar
Here's what you might expect as an answer to your question:

1. Majority of views are positive
2. Majority of views are negative
3. views are evenly split.

If you get #1, does that truly tell you the company will do well in the future just because people give favorable reviews?
If you get #2, does that truly tell you the company will not do well in the future just because people give negative reviews?
If you get #3, what do you do?

You do know that many reviews online (from complete strangers) are not legitimate anyway.
examples:
someone could give a positive review because they own the stock and want you to pump up the price so they can dump it at a higher price than they bought
someone could give a negative review because they want to buy it at a lower price than you or get you to avoid it so they can scoop it up.

Since when do other people's opinions count as having done your due dilligence?

if I were a shoe shine boy, would my advice carry any weight?

You say "load up on them for the long term". What's your definition of "long term"? How can you possibly know how well a company will do over that time frame? If you're enamored by these companies today, you might want to "load up" but the company might not be the same company over the long term.

Some things to think about, right?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
fwellimort
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Re: BABA and Tencent

Post by fwellimort »

Chinese stocks in general are weird.
1. There are a lot of politics involved. You are at mercy of both the US and China.
2. Financial statements can be faked (look at Luckin Coffee).
3. You don't have 'ownership' unlike owning a US stock (your stock might be worth $0. Who knows.).

I think it's no mystery at this point that Alibaba's valuation relative to its financial statements seem very attractive.
It's pretty known throughout the financial industry at this point. It looks like a no brainer on a balance sheet basis.

Problem really lies on the 3 issues above (mostly issue #1). With how many times the CCP has stepped in to Chinese tech stocks (e.g.: Ant IPO and DiDi stock crackdown), it's really difficult to know if foreigners are 'allowed' to benefit from the growth of these companies.

'Long term' in this stock lies less on the company (it's doing great on paper) and more on China approving foreigners from benefiting off the VIE ownership + China letting these tech giants grow in size.
I have money on BABA that I have added very recently but do note, this is a stock that can go in the extremes depending on how the politics play out.
BABA's financials might be easier to imagine for future growth from looking back at the effects of cloud growth/profits from the American counterparts.
(with assumption China will have a rise in its middle class and that the domestic market will be catered by non-foreign firms)

Tencent is probably a lot more complicated to understand but also a great company (I don't hold shares cause it's too complicated for me but it does have holdings of some great companies).
For those interested in Tencent, there's the 'unusual' ownership going on through Naspers. Naspers is a holding company and its market cap is less than just the holdings of Tencent alone; the market is pricing Naspers will bring negative value over time with its holdings. Just something intriguing to look into. The market might be right but maybe it might not be. I have no idea about companies like takealot.com to figure out what's going on there but even I am confused of why Naspers is so 'cheap' relative to its Tencent holdings alone.
(Oh, and you will have 2 different country political risks by holding say Naspers or Prosus. So there's that issue too.)

Different countries have different political risks. China especially so because the Chinese government knows foreigners are eager to invest in China because there's such a great promise. But it's because of this China can get away 'screwing over' its foreign investors again and again and again and again.
Then there's the issue with 'how much can I trust the balance sheets'. 'China Hustle' in a nutshell.

https://doc.irasia.com/listco/hk/alibab ... ar2020.pdf
On the flip side, I will also add, some of my Chinese friends don't even touch Chinese stocks themselves cause they don't trust the Chinese govt (and the numbers in the financial statements). If you are investing in Chinese companies, then do so knowing that you are taking a huge risk.
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Re: BABA and Tencent

Post by HoraceMann76 »

They’re a great value right now…..but I gave up yesterday and sold them all and moved it to VWO which is where I probably should have been all along. I don’t want to sit in those and wait for the CCP to trickle out a slew of arbitrary rules and suprises.
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Re: BABA and Tencent

Post by fisher0815 »

fwellimort wrote: Thu Jul 08, 2021 6:28 pm but even I am confused of why Naspers is so 'cheap' relative to its Tencent holdings alone.
Naspers is a Tencent investor from the early stage. They have huge unrealized capital gains. When Naspers would sell Tencent shares there would be a big tax bill. It's the same with Softbank and BABA: https://valueinvestorsclub.com/idea/SOF ... ges/157516
Other reason is that Naspers had become way too big for the Johannesburg stock market.
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Swiss Bee
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Re: BABA and Tencent

Post by Swiss Bee »

Thank you all for your advice.

One more question: while buying an EM/China index fund diversifies your risk exposure to individual companies, you would still face the issue of holding ADRs (the ETF buys them for you). The only difference would be if BABA or Tencent as a company would not do well, you are diversified. However, the political risk between China and the U.S. (i.e. the biggest risk) remains with these ETFs. Therefore, I am not sure if an index fund can solve this issue… 🤔

Consequently, if you believe that neither China nor the U.S. have the power/political will to make these ADRs become worthless (the impact on investors would be huge!), then these companies look incredibly cheap and promising.
Last edited by Swiss Bee on Sat Jul 17, 2021 12:08 am, edited 1 time in total.
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anon_investor
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Re: BABA and Tencent

Post by anon_investor »

Swiss Bee wrote: Fri Jul 16, 2021 11:59 pm Thank you all for your advice.

One more question: while buying an EM/China index fund diversifies your risk exposure to individual companies, you would still face the issue of holding ADRs (the ETF buys them for you).

The only difference would be if BABA or Tencent as a company would not do well, you are diversified. However, the political risk between China and the U.S. (i.e. the biggest risk) remains with these ETFs. Therefore, I am not sure if an index fund can solve this issue… 🤔
This is why I am 100% US equities. :beer
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Re: BABA and Tencent

Post by Caduceus »

Their annual reports are on my to-read list. I downloaded the 2020 reports a while back, but haven't read them yet because of the time commitment it would relative to other annual reports I could read.

Now that Charlie Munger's become a believer, I will probably read it in the next few weeks. Most of my Asian and Southeast Asian friends are touched in some way by Alibaba's businesses, and Taobao is just huge. If you're not in one of those regions, you probably won't understand just how ubiquitous it has become. Alibaba owns many things you don't realize it owns. And their financials, at a glance, seem really great.

One of my ex-boyfriends is Chinese and he's been trying to show me all the things I can buy from China. But when I look at the interface, I wonder how exportable it is to the rest of the world because it just isn't in English, and the listings that are in English appear really strange/weird to an native speaker. I didn't quite realize the advantage that Amazon and Ebay had in this regard - the sellers doing the listings do a lot of the work and free labor for them. Until Alibaba can figure out a way to bridge the language barrier, its market will probably be limited to "Greater" Asia, which is more than sufficient for them for a long time.

China is more advanced than we are in some ways. When I first visited a few years back, I was quite surprised at how cash-less their society was, both in the cities, and even in places I'd consider pretty rural. I went into a McDonald's and was the only one paying cash. Lots of young people had already placed and paid for orders and simply scanned a code at the counter to pick up their order. Then, I'd gotten a bit lost at night wandering around some deserted villages, and when I made it onto a main road, I couldn't hail a cab because, well, guess what ... they all use ride-hailing apps now. So a young man offered to book one for me on his app and I paid him in cash. This was many years ago, and I'm sure they're even more advanced now.
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Swiss Bee
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Re: BABA and Tencent

Post by Swiss Bee »

I believe Munger, Pabrai, Dalio are all believers… and they know a thing or two about pricing risk…
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Re: BABA and Tencent

Post by nisiprius »

Swiss Bee wrote: Sat Jul 17, 2021 1:21 am I believe Munger, Pabrai, Dalio are all believers… and they know a thing or two about pricing risk…
Then buy Berkshire Hathaway stock and get the continuous management of Charlie Munger personally working for you.

The other two are probably out of your reach, certainly mine, in terms of investing in the funds they manage (or, in the case of Dalio, formerly managed).

The sentence "I believe Munger, Pabrai, Dalio are all believers" is interesting, apparently involving belief in belief. " You had better do more than "believe" Munger is a believer if you want to act on Munger's beliefs. I am not even sure what it means. Can you find some place where Charlie Munger says anything like "I am a believer in Tencent and I recommend that most investors have some in their portfolio?"

As an exercise, and I am quite serious about this, spend half an hour and locate some actual quotations from these people and tell us what they actually say about these companies in their own words, not someone else say they are "believers."

Another possibility, if what they are really saying is they think Chinese stocks in general are going to outperform the US market, would be simply to invest in the Vanguard Emerging Markets Index Fund, which is 40% Chinese and has Alibaba and Tencent as its second and third largest holdings... or a China mutual fund or ETF.
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Swiss Bee
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Re: BABA and Tencent

Post by Swiss Bee »

Well, they all bought BABA. This is what I mean as believer :wink:
index2max
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Re: BABA and Tencent

Post by index2max »

Do NOT buy stocks of Mainland China companies. Even though some are listed on US Exchanges, you're actually just buying shell company subsidiaries of theirs listed in Cayman Islands etc. Zerohedge had an article about this recently, but I can't find it at the moment.

The mainland Chinese government does not want foreigners to have a foothold in their economies or ownership of their companies either.

https://www.scmp.com/business/china-bus ... ing-steady

If you are a US investor, stick to investing in US-listed companies. China does not allow foreign financial auditors to look at the books of their companies. By investing in publicly traded mainland chinese companies, you are handing over your money for shares in businesses that may be nothing more than frauds.
fwellimort
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Re: BABA and Tencent

Post by fwellimort »

nisiprius wrote: Sat Jul 17, 2021 7:27 am Then buy Berkshire Hathaway stock and get the continuous management of Charlie Munger personally working for you.
Berkshire Hathaway does not invest in Alibaba and Tencent. More than likely, Berkshire Hathaway will most likely not invest in these firms even in the near future.

What Buffett and Munger does with their personal accounts can be different from the investments of Berkshire Hathaway.
Berkshire Hathaway != Munger or Buffett

Anyways, like the above reply states:
The biggest risk of Chinese stocks is that you don't actually own any shares. There's nothing stopping you from losing everything.
The risk comes from political level. A very high risk play (risk vs reward).
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Re: BABA and Tencent

Post by Northern Flicker »

nisiprius wrote: Thu Jul 08, 2021 6:38 am It is my personal opinion that if an investor who has not at least looked at the balance sheet in the annual reports, "read" that balance sheet, and reviewed the footnotes, then that investor should not invest in the individual stock of that company. Have you done that?
What you are buying are VIEs that have no balance sheet. They derive income from companies in China which have balance sheets. I believe that the filings of performance data made to regulatory agencies in China by those companies are in Mandarin.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
danrock54
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Re: BABA and Tencent

Post by danrock54 »

Are there any Chinese stocks that were not affected by events ? As long as there is regulatory risk, even Emerging Markets index funds will suffer badly, since China+HK are more than 50% of their holdings.

The flip side is also obvious - huge upside if things calm down.
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Re: BABA and Tencent

Post by Northern Flicker »

Hong Kong equities are developed markets (as of today). Chinese companies with securities listed in HK are accounted for in the weighting of Chinese equities in an EM or total int'l index fund.

Buying individual stocks exposes the investor to security-specific risk. This risk may be higher with Chinese equities than with US equities, but in both cases it is not compensated with additional expected return because it is a diversifiable risk.

When security-specific risk materializes, it often is something you would not have even considered when the stock purchase was being made.
Last edited by Northern Flicker on Mon Jul 19, 2021 2:18 am, edited 1 time in total.
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Re: BABA and Tencent

Post by Northern Flicker »

Swiss Bee wrote: Thu Jul 08, 2021 6:13 am Any views on BABA and Tencent? I know that stock picking is bad but I really want some opinions on loading them up for the long term?
My opinion is actually a question. Why are you wanting to do something that you believe is a bad strategy?
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: BABA and Tencent

Post by David Jay »

Swiss Bee wrote: Thu Jul 08, 2021 6:13 am Any views on BABA and Tencent?
No. Just No.

Westerners keep trying to overlay their western worldview on China. Having lived and worked there, China ain’t like that.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: BABA and Tencent

Post by wolingfeng »

Agreed with posts above… I feel like most Chinese stocks fundamentals are not only their true business dealings, but also the politics in China. I know BABA and Tencent may be making lots of money in China, but anything can change with a stroke of pen from the higher up from Chinese government… if you plan to invest significantly in those, hope you have some projections in how politics will play out in there. I know I have no clue..
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Re: BABA and Tencent

Post by Swiss Bee »

Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
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Re: BABA and Tencent

Post by fwellimort »

Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
It's just something I don't think markets can truly figure out 'how risky' the politics play is.
Just how 'risky' is all this politics play. Who knows. It's a mystery.
I have shares of BABA but I am well aware of 'what could go wrong'. Personally, I highly doubt anything will occur (Tencent trades in OTCM and is doing perfectly fine)... and I like to believe all this is over exaggerated as an East Asian myself. I could always be wrong but hey, hindsight is 20/20.
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Re: BABA and Tencent

Post by Northern Flicker »

Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
If the odds of a 10x return over a few years were quite high, institutional investors who have detailed models suggesting that would be piling in, and the price would rise until the valuation was commensurate with the risk and return. Individuals without a detailed model of fair value, do well to assume the market in aggregate has a better assessment of fair value than they do. Just becsuse something dropped 30% doesn't mean it has a high odds of returning to the peak in short notice. Institutional market participants are looking 10 years out with projections of revenue, and the odds that the projected revenue materializes.

There are stocks that will explode and return 10x in a short period. If they were easy to identify, market participants would be jumping on them until the price no longer reflected an undervalued stock.

This article has some relevant info:

https://finance.yahoo.com/news/china-si ... 00682.html
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
fwellimort
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Re: BABA and Tencent

Post by fwellimort »

Northern Flicker wrote: Mon Jul 19, 2021 11:37 am
Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
If the odds of a 10x return over a few years were quite high, institutional investors who have detailed models suggesting that would be piling in, and the price would rise until the valuation was commensurate with the risk and return. Individuals without a detailed model of fair value, do well to assume the market in aggregate has a better assessment of fair value than they do. Just becsuse something dropped 30% doesn't mean it has a high odds of returning to the peak in short notice. Institutional market participants are looking 10 years out with projections of revenue, and the odds that the projected revenue materializes.
Ya. I think 10x is asking a bit too much (OP. Check the market cap alone. That's a bit ridiculous).
But I wouldn't be surprised if a stock like BABA went 30% up in the next 2~3 years. Given how richly valued the US Stock Market is (overall), this seems overall like great numbers.

That said, Chinese stocks are really weird. A lot of institutional investors just can't invest in Chinese stocks given the current climate.
In addition, it's hard to figure out "fair value" when the downside is:
1. China decide foreigners cannot profit
2. All the numbers in public statements are cooked

How do you value a company when next year, CCP can officially bar a company like Alibaba from increasing more? You really can't.
Both institutions and retail investors alike honestly have no real way of judging the 'fair value' of a company like BABA currently.
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Re: BABA and Tencent

Post by Northern Flicker »

Yes, it is hard to price opacity, but that does not work in the OP's favor either.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: BABA and Tencent

Post by David Jay »

Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
Do what you want, you have been warned.

Bloomberg article today says: “The death of ADRs was inevitable...”, here: https://finance.yahoo.com/news/china-si ... 00682.html
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Re: BABA and Tencent

Post by David Jay »

nisiprius wrote: Thu Jul 08, 2021 6:38 amCan you name the CEOs of Alibaba and Tencent? (I can for Alibaba, but not Tencent).
Daniel Zhang?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: BABA and Tencent

Post by nisiprius »

David Jay wrote: Mon Jul 19, 2021 7:56 pm
nisiprius wrote: Thu Jul 08, 2021 6:38 amCan you name the CEOs of Alibaba and Tencent? (I can for Alibaba, but not Tencent).
Daniel Zhang?
I'm an idiot. Nope, you're right, and I can't name either. I thought the CEO of Alibaba was Jack Ma. It's a good thing I don't try to invest in individual stocks.
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Re: BABA and Tencent

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Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
Swiss Bee,

Please explain how that is possible?

A) BABA current market Cap is 585B

B) TCEHY current market cap is 697B

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Re: BABA and Tencent

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nisiprius wrote: Mon Jul 19, 2021 8:50 pm
David Jay wrote: Mon Jul 19, 2021 7:56 pm
nisiprius wrote: Thu Jul 08, 2021 6:38 amCan you name the CEOs of Alibaba and Tencent? (I can for Alibaba, but not Tencent).
Daniel Zhang?
I'm an idiot. Nope, you're right, and I can't name either. I thought the CEO of Alibaba was Jack Ma. It's a good thing I don't try to invest in individual stocks.
Nope, he got “cancelled” for a mild suggestion about Improved governance at a conference in Singapore in October of 2020.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: BABA and Tencent

Post by Swiss Bee »

KlangFool wrote: Mon Jul 19, 2021 9:09 pm
Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
Swiss Bee,

Please explain how that is possible?

A) BABA current market Cap is 585B

B) TCEHY current market cap is 697B

KlangFool
Hi KlangFool,

I don’t have a crystal ball, but the upside looks promising. :happy Amazon’s market cap is 1.8 trillion. BABA going into global shipping with delivery in a few days and China growing as it is, this could be a 2-3 bagger easily. Ok, 10 is probably exuberant, but who knows… :sharebeer :sharebeer
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Re: BABA and Tencent

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David Jay wrote: Mon Jul 19, 2021 7:50 pm
Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
Do what you want, you have been warned.

Bloomberg article today says: “The death of ADRs was inevitable...”, here: https://finance.yahoo.com/news/china-si ... 00682.html
Hi David,

I really appreciate your views, thank you. I genuinely believe that it is important to hear other (especially opposing) opinions, before making investment decisions.

Thank you for the warning :wink:

It is all about capital allocation. Myself, I would rather invest 5-10% of my portfolio in risky growth stock rather than Bitcoin etc…

Cheers :sharebeer
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Re: BABA and Tencent

Post by David Jay »

Swiss Bee wrote: Mon Jul 19, 2021 11:05 pm
David Jay wrote: Mon Jul 19, 2021 7:50 pm
Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
Do what you want, you have been warned.

Bloomberg article today says: “The death of ADRs was inevitable...”, here: https://finance.yahoo.com/news/china-si ... 00682.html
Hi David,

I really appreciate your views, thank you. I genuinely believe that it is important to hear other (especially opposing) opinions, before making investment decisions.

Thank you for the warning :wink:

It is all about capital allocation. Myself, I would rather invest 5-10% of my portfolio in risky growth stock rather than Bitcoin etc…

Cheers :sharebeer
You do understand, right? The CCP could possibly shut down existing ADRs, which is what BABA is (When you buy BABA, you are not investing directly in Alibaba, you are investing in an ADR).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: BABA and Tencent

Post by Swiss Bee »

[/quote]
Ya. I think 10x is asking a bit too much (OP. Check the market cap alone. That's a bit ridiculous).
But I wouldn't be surprised if a stock like BABA went 30% up in the next 2~3 years. Given how richly valued the US Stock Market is (overall), this seems overall like great numbers.

That said, Chinese stocks are really weird. A lot of institutional investors just can't invest in Chinese stocks given the current climate.
In addition, it's hard to figure out "fair value" when the downside is:
1. China decide foreigners cannot profit
2. All the numbers in public statements are cooked

How do you value a company when next year, CCP can officially bar a company like Alibaba from increasing more? You really can't.
Both institutions and retail investors alike honestly have no real way of judging the 'fair value' of a company like BABA currently.
[/quote]

Thank you for sharing this. I fully agree with the uncertainties/ risks you are describing. :happy That said, investing in an overpriced U.S. market (with inflation coming) is not risk free either…
:wink:
As these companies are the “crown jewels” of China, my best guess is that also the political leadership wants them to do well. But again, I obviously see the risk too and don’t have that crystal ball :wink:

Thank you for the reply :sharebeer
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Re: BABA and Tencent

Post by nisiprius »

David Jay wrote: Mon Jul 19, 2021 11:13 pm...You do understand, right? The CCP could possibly shut down existing ADRs, which is what BABA is (When you buy BABA, you are not investing directly in Alibaba, you are investing in an ADR)...
But to be fair, this is just part and parcel of "emerging markets risk." It shouldn't be a matter of debate whether emerging markets stocks have greater risk than developed markets: of course they do. The legitimate debate is whether the risk is likely to be rewarded.
Swiss Bee wrote: Mon Jul 19, 2021 8:53 am Looks like the odds of losing everything (1x) is quite low, but the odds of making 2-10x over the next few years is quite high…
This is the clearest statement one can imagine. Swiss Bee is seeking positive skew. He is a risk seeker and he wants a jackpot. He thinks emerging markets are a favorable place to find it. He thinks individual stocks of well-known Chinese companies, stocks that he has read that prominent investors have bought, are a favorable place to find it. Shenanigans on the part of the Chinese government are just part of the many risks that give the reason for hoping for higher return than you would get from a US stock index fund or a share of Berkshire Hathaway.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: BABA and Tencent

Post by Northern Flicker »

Swiss Bee wrote: It is all about capital allocation. Myself, I would rather invest 5-10% of my portfolio in risky growth stock rather than Bitcoin etc…
We do have frameworks for systematic risks that are compensated with higher expected return-- higher percentage of stocks relative to bonds and factor tilts. When you take on uncompensated risk, your chances of getting the juiced return are diminished.

Diversifiable risk is uncompensated.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: BABA and Tencent

Post by Northern Flicker »

nisiprius wrote: This is the clearest statement one can imagine. Swiss Bee is seeking positive skew... wants a jackpot
Getting an extra 5% portfolio return by having increased one's percentage allocation to stocks may not foster the same cocktail party bragging rights as allocating 5% to a handpicked stock that doubles and then earns the return if the residual portfolio to achieve the same 5% bump in portfolio return. Of course the opposite should be true-- taking less risk to get the extra 5% in portfolio return is something worth bragging about.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: BABA and Tencent

Post by Swiss Bee »

Thank you for your valuable input, nisiprius 🙏
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