Fundamentally, the company's recent business performance has shown good results.
When selling a stock, you have to reflect on your initial buy thesis and check whether it is still intact. Can you share with me what is the initial reason why you bought it?
Once I understand your thoughts, I can point you in the right direction.
Hi Victor,
I first bought it as it was undervalued. I DCA-ed and hence my average is $135. The business is doing relatively well with healthy cash flows. Initially I thought the Jack Ma saga is temporary. But it seems like they are not getting out of it since 2021. Recently, PDD overtook Alibaba. And there was management issues and changes too. I’m not sure if Alibaba is able to turn around itself especially when the competition is to strict. The splitting of sector didn’t seem to turn out well for them too. But then again, it is true that Alibaba is still strong interms of its revenue and cash flows. Maybe more of the management quadrant that I can’t decide if it’s strong now.
Thank you!
Hi Bernice,
From your reply, your thesis and concerns are based on three factors:
- Strong fundamentals with a temporary situation
- Increasing competition
- Constant changing of management
Point 1
Regarding the first point, most investors do see the value in this company and its strong fundamentals. The key actually lies in the temporary situation and how fast it can turn around. I would say that most new investors are spoiled by the recent years' fast recovery of the U.S. market, such as the Covid crash and the swift recovery in 2023, as seen with stocks like Meta. If you look back at the history of stock market crashes or situations, it usually takes time for recovery in the stock market. For instance, Chipotle was affected by a food poisoning incident and experienced a downtrend for four years. However, when it recovered, it was not a straight line up. It took Chipotle about five years to reach back to the previous peak, and if you continued to hold, from the bottom price, they went up at least 10 times. Unless the temporary situation has a catalyst, in most cases, it really needs time for the situation to recover.
Point 2
For the second point, you are right about the competition, as it is getting more intense. Hence, monitoring of the situation is needed if you continue to stay invested. From the recent revenue and profit growth, it seems like they are still able to handle the current situation.
Point 3
Alibaba is built in a way that it does not rely on a single person, which is why when Jack Ma was out of the picture, the company was still able to operate. They recently got Joe Tsai back as chairman, who is the initial co-founder, educated in the U.S. and has a background in private equity. I think he is a good fit for the current situation.
Thank you very much Victor, I appreciate your detailed inputs and sharing. I will continue to monitor the situation.
Welcome Bernice :)
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