for long time followers of my anti r/investment portfolio. This was my largest position I still believe it is underpriced, despite a 60%~ run up this year. It basically suffers from a lack of attention across the board. Tech growth investors focus on the US, value investors wouldn't touch tech, much less China, EM investors pile into indexes which don't cover companies listed in the US.
2 second level potential mispricing
- US listing of a chinese company means most investors think it is a fraud, which means valuations is low. ~USD50 billion market cap for a company with USD80 bn GMV runrate/35% mkt share of ecommerce in China and growing at 40%~ that is backed by Tencent.
- It is a double fraud for investors if the company is amazon like and never shows a profit. People believe Alibaba's high margin capex lite model ebay model is superior, the problem is that China is a low trust society, people would rather have their relatives ship in milk powder from abroad at exorbitant fees than buy in "well known stores", so having a very strong anti-fraud process and controls across procurement to endpoint distribution will be important to long term success as Chinese consumers migrate up the value chain. The partnership with tencent is becoming more and more important as the shift to mobile is rapidly underway. As a whole, I feel like the company is forsaking short term profitability to build in longer term value and I always like these type of businesses. Short term pain for long term gain. Alibaba may be seen now as the more sexy high margin play, but I feel like Jack Ma is not someone I put a lot of faith in (given the whole Alipay ordeal and his known impulses to buy football teams).
Submitted May 08, 2017 at 05:23PM by vegaseller http://ift.tt/2psLoee
