Alibaba Valuation 2021 - What Price To Buy PLUS Thesis
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Hi, if you have been following me for a while, you will know I am looking for small cap companies that could potentially be 100 baggers.
Although I think there is still a place in the portfolio for the large caps, the big advantage I get as a small investor without institutional money is that I can look in the small cap universe that is neglected by the big guys.
Therefore there is more chance of inefficiencies.
But, Today is a complete exception. I have been watching this company for years now, and the price has just become too compelling.
I have made videos on Alibaba before so check them out to see more detail about the company and how I think about the investment.
But today, I'm going to go through my investing thesis on Alibaba as I am now invested.
Positives
Mohnish Pabrai, Charlie Munger, The Tweedy Browne Value fund, Ray Dalio, and many more super investors have been buying Alibaba. They were buying somewhere around $220 per share.
Mohnish Pabrai is my favorite investor. It’s really compelling to invest alongside someone who I consider as the best in the world. No matter how much research I do on Alibaba, it just doesn’t compare to the decades of experience from these famous investors. They have been through many cycles, investigated thousands of companies, so when they invest heavily into a company, It is a massive tick of approval.
The company has already gone through some extremely strict and thorough filters to reach the portfolio’s of these investors. So I think this gives us all the most conviction. Sure, they might be wrong on this, and we can’t predict the future, but its is definitely far better having these guys as investors alongside us.
Cloud computing currently makes up about 8% of revenues for Alibaba, but I think this is where a lot of the growth is going to come from. Like AWS from Amazon, Alibaba cloud essentially acts as a toll bridge to the internet. Cloud grew over 60% Year on year, and is the number 1 provider in Asia/pacific and 3rd in the world.
The margins of this part of the business are exceptionally high and is probably what I am most excited about moving forward for this investment. This is the upside potential that we might get that we are hardly accounting for in the current valuation.
Negatives (answer each negative)
The ADR listing technically means you don’t own shares in Alibaba.
Delisting concerns (these are probably over now)
Fierce competition in the ecommerce world.
China’s increasing regulations on China big tech.
Let me know in the comments what you think and hit the LIKE button if you enjoyed this :)
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