Is the Worst over for Alibaba? Time to go all in at the bottom?

I had said in the past that 160/400 would likely not be broken, but ended up I was wrong and now Alibaba is already at 14x and there is still much fear. Lets look at Alibaba from a logical view..

First of all major funds are now valuing BABA at a lower valuation due to a few reasons…

Like now the the labor laws are enforced and 996 culture is discouraged.. meaning they will need to hire more workers to do the same work, increasing wage cost and earning into profits'

Ant Financial has been like written off by investors due to its failed IPO and also its restructuring… it will become more asset heavy like a bank and ROE is hurt… instead of super asset light and super high margins to churn out 50% ROE it would likely fall towards 20% levels

Over the past decade Tech Giants has enjoy a preference tax benefit of only paying a low 10% tax… in recent Tencent conference call they expect taxes to go up to 20%.. so I think the same applies to Alibaba… thus this will lower core earnings

So now institutional investors have lower their target prices of Alibaba by a lot… they are pricing Alibaba as if its gonna see its earnings crash by 50% and that Ant Financial will be totally worthless and nationalized

Alibaba has been sliding for 12 months already… when it fell from 317 to 240 and Charlie Munger bought in early 2021.. investors shouted for the bottom… then it fell further to 180 and investors shouted for bottom again…yet it still continued to fall and now its at 145 levels.. investors are so scared and so burned that no one dares to shout of a bottom anymore… in fact no one sees a bottom in sight and fear is at maximium!

in WSB wallstreetbet reddit… there has been a lot of discussion on BABA its been top 3 discussed stock for recent months.. some of them did the YOLO FML ALL IN call options LONG on BABA… and all of them have died and given up! All the traders , speculators and paper handers… all got burned so badly… and discussion on BABA is fading away already… they do not believe in BABA anymore as each time they try to go in to catch a bottom they fail and get their fingers burned and asses wiped out…

Alibaba has already raised its game by declaring share buy back increase from 10bil to 15bil… and Tencent is also aggressively doing its share buyback by buying 100 mil HKD dollar worth of share daily… however its technically not helping the prices enough but still this is fundamentally good for the company… you want to buy back your shares the lower the better… imagine their shares now trading at 1 cent… now u can buy all shares… and you now own the entire company!!! as everyone is giving away their stake to you for free!!! share buy back at such low prices fundamentally benefits those who did not surrender and holds on for the long term as the per share ratio will improve drastically

Are there still potential risk or segments to be hit going forward? yes of course… example their Alihealth business is not harmed yet… their media business is not fully sold yet…. there is always an uncertainty that the e-commerce business will not be as booming as before and growth rates may slow down from 30%-40% levels towards 20% levels instead

The overall China economy is also looking to slow down due to the covid out breaks, the China Evergrande Saga and the sharp rise in commodity prices hurting manufacturers…

How long will the CCP hammering last? How long will the economic slowdown in China last? the fact is I do not have the answer and no one has the exact answers… but an educated guess base on historical data and gut feel… I would say 6 to 12 months more at most…so this could continue till 2022 chinese new year… or drag on to mid of 2022 also possible… but definitely not into 2023 for sure

A Blue Chip Tech Giant that has leadership position in E-commerce, Logistics, Payment and Cloud computing in China… with a historical track record of high growth and super cash cow engine… the 50% to 60% discount from peak is surely a very rare opportunity that is probably only seen once in a decade… its not every day or every year that you see such a high quality business being sold down till so cheaply

From an Economist view… China was the first economy to show a slow down… as the economic bubble was forcefully popped by its own government… as much worries investors have about of the Chinese markets… investors are missing out of the big picture… This is just the beginning of a global event… this may be a global down cycle considering the ravages of Covid… China falling first doesn’t mean other major economies like US/Europe/Japan are immune… there could be a high like hood of a domino effect spreading across the world soon…

Higher commodity prices, slowing economy, property bubble, tech regulation… you think about it… its not just a China only phenomenal… widen your eyes and you will see the bubble in the west too… and that bubble in my view is a lot bigger… China has popped but we should not kid ourselves that there is no bubble in the west..

If a global recession is true… where do u wanna hide? what businesses do u want to own? do you want to hold airlines or construction during a recession where people are jobless and have no extra money to spend? so obviously you want to hold on to defensive stocks… businesses that can still churn out lots of cash as they provide a basic need… example a super market… example a macdonalds… no matter how deep a recession people still need to eat and get their toilet paper right?

Alibaba’s core E-Commerce business is still the cash cow, its still the online super store that will not be hit hard by a recession… that’s the defensive part of Alibaba… and on the growth side there is cloud computing that has over the 5 years when 30x already in revenues… E-commerce+Cloud Computing… think Amazon…

in a recession I would still rather be holding on to FAAMG BAT than the index… which has many cyclical stocks like Banks, Property, Airlines, Energy etc….during a down turn cyclicals will report big down in earnings and even losses… while defensive stocks will be able to maintain earnings and hold up defensively… I think the tech giants will hold up in their numbers… people who are jobless and camping at home will still watch youtube, shop online, play games and chat with their friends on social media…. the tech giants are simply recession prove and you know it too!

We all know big tech is good and you want to own them and suck dry the poor folks forever…. but when do we buy big tech? … do you want to buy them high or buy them low? in 2018 FB fell by almost half from 210 levels to 120 levels… if u bought it.. you would almost have tripled your money in just a short period of 3 years!

Why did FB crash by 50%? I think most investors has forgotten… its was due to the Cambridge Analytical Scandal… it was a gloomy period where everyone was bearish on facebook… saying it was evil, it was wrong… the government was slapping it and taking it to court… nobody wanted FB shares.. everyone bashed it… when something drops 50% everyone warns you not to buy it and be careful about it…. hahaha

today nobody wants BABA shares… 3 years later will BABA be like FB going 3x from 140 to 400?

your guess is as good as mine

but my money is in the game and I when all in

I either die big or win big

see ya in heaven or hell

ML