Are Mr Munger, Mr Pabrai and other value investors onto something?
Over the last few months these big hitters have been accumulating BABA stock. It is still a stock some 30% or so from its 52-week highs just a few months ago. BABA continues to post fantastic growth numbers and its dip in share price some may say is not reflective of the true market value. Mr Charlie Munger, who works directly for a certain Warren Buffett and is an integral part to Berkshire Hathaways growth has spent $34 million dollars on it. He only holds 5 stocks through the daily journal. A closer look is probably required.
Looking at the stock ranks, at a first look its only good measure is quality at 95. The other rankings are fairly poor, the momentum of the stock is low due to its drop off recently I do urge anyone interested to look at a 5 year chart, the chart is not weak and shows perhaps that there is value to buying it on the dip?
Lots of other commentators compare the stock to amazon, but I feel this is a difficult comparison to make. Alibaba has a very different approach, its methodology is to focus on growth (which is still stratospheric) and this is why for such a big company perhaps value investing can meet growth.
It has grown every quarter since inception with revenue increasing still today at rates which are dizzy, it latest results show a 64% increase in revenue year- on- year. Remember this is a $590 billion market cap company, how many giants post that? Its current aims are to invest in the cloud market and also logistics so a lot of this cash is being recycled into the company and other monies spawning new companies. As a result it runs the margins small(ish) and is building a big moat to capitalise on. For example look who sponsors euro 2020 football tournament.
So there is the company itself that is showing growth but also remember this is a Chinese giant, hence all the greater macro trends in middle class growth also benefits it. The Chinese economy will overtake the USA, its just a matter of when and therefore the worlds biggest companies may well not be US based over the next decade. To me it’s logical the worlds biggest companies will belong in the worlds biggest economy. Is BABA…
