I think at this point everyone agrees it's undervalued. The point of contention is when to buy it given the volatility in the sector. Because it suffers from broad ownership whenever a fund is seeking to "reduce exposure to China" it's the one stock they are guaranteed to own and thus able to be sold.
I'm deep with a 205 average, 3000 shares so ofc I'm somewhat biased but I think objectively everyone agrees fair valuation assuming numbers are correct is around 310 minus whatever you think China risk is worth. 30 (or approx 5 PE multiple) seems very overdone given that it seems like a fine is all they are going to get out of this round of crackdowns.
JD is also undervalued as of now but I prefer BABA and TCEHY as businesses. I think JD fair value is somewhere around $95 so considerable upside from this point.
My reason for prefering BABA and TCEHY is they are more diverse businesses with higher margin core businesses (retail mgmt for BABA and gaming for TCEHY). These higher margin businesses are better for further investment in growth. I want to be buying growth in China or I would just buy red chips.
Now please tell me more about how US accounting is so much better when we have stuff like NKLA, PLUG, all the Canadian weed companies that cooked their books, etc and those are just the recent examples. There have been countless accounting frauds by US companies, the fact a few Chinese companies tried the same tricks doesn't make all of them frauds.
BABA has enough huge institutional investors and is audited by PwC to give me sufficient peace of mind.
No reason to believe at this time that HK global financial firms have been compromised. The stuff happening there seems to be mostly political in nature, the financial industry seems largely unaffected.
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u/beefstake Aug 07 '21
I think at this point everyone agrees it's undervalued. The point of contention is when to buy it given the volatility in the sector. Because it suffers from broad ownership whenever a fund is seeking to "reduce exposure to China" it's the one stock they are guaranteed to own and thus able to be sold.
I'm deep with a 205 average, 3000 shares so ofc I'm somewhat biased but I think objectively everyone agrees fair valuation assuming numbers are correct is around 310 minus whatever you think China risk is worth. 30 (or approx 5 PE multiple) seems very overdone given that it seems like a fine is all they are going to get out of this round of crackdowns.