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$BABA Comeback

$BABA Comeback
Written by
Dawson Ignatieff
Dawson Ignatieff
Published on
February 7, 2024
Read time
3
 min read

$BABA is cheap as chips

If you follow us, subscribe to us, or hate us, you’ll know that we are small-cap guys, but where there is value, there is value, and $BABA is staring me down like a fat chick at 3 am at the local country dive.

Personally, $BABA is my largest position and I recently added a shit ton more (so did Burry). I am a true believer in this thing despite the agony it has given me the last couple of years (I bought it in 2021), but like the last weekly lesson I wrote, have some fucking conviction and confidence in your beliefs, grow a set of balls, put your money where your mouth is, remember why you bought in the first place and buy more.

Sometimes the only way out is all in.

$BABA Fundamentals

Look, I am not one to use other people’s numbers, however, this was pulled from www.gurufocus.com which does a great job of staying on top of the game, and I wanted to show the various applicable valuations and the steep discount it is trading at to them (it’s at $74 rn).

Personally from my own valuation metrics (MOS & 10 Cap formula), I pulled numbers from $130-$300 for the fair value of $BABA.

You will not find a rating or metric that ranks this thing cheaper than $100 besides some broken automated site or tangible book value (sitting at a 1.31 p/b ratio)

Alright I’m gonna spit a fucking Fundamental Haiku on y’all here

$24b in Free Cash Flow

Whopping $80b cash on hand

With a $185b mkt cap

Only $23m debt

$25b share buyback plan

Co-founders just bought $200m in shares

13.2x P/E

That was no Haiku but the point is $BABA is financially sound and sitting at a low valuation compared to its cash on hand, buy-back plan, and Peers.

Why is it down -76% from its high in 2020?

China.

China imposes a huge political risk and a struggling economy right now.

China fined the shit out of $BABA over an anti-monopoly lawsuit and the regulatory system over there has repeatedly fucked them over by canceling IPO’S & beefing with the SEC, there were even talks of a US delisting of the equity.

All this fuss and political risk scared off a ton of investors and sent the stock plummeting. During this time a lot of the regulatory issues were resolved and the threats were deemed idle.

Also, it just so happens China’s economy is slipping into a recession.

Things haven’t optically looked great for Chinese equities as a whole…

Bull Case

In my eyes, all this fuss did was create a buying opportunity. No internal damage was done, the company is still shitting cash, and growing at an impressive rate.

Financials remained steady (a bit of a rough year last year) but that is expected due to a poor Chinese economic situation.

I am more impressed than concerned about the blip in 2023, remaining those numbers in a bad Economy could be seen as bullish.

Lastly, China just put out that they are going to stimulate the markets through capital injections, and cracking down on short selling, they have had enough and are going to go full 2020 Jpow on the fucking markets.As $BABA is the 7th largest company in China and the 1st largest E-commerce company in China, as the Economy recovers, $BABA will be greatly affected.

That’s All Folks

Maybe I’m delusional and insanely biased because if I’m wrong I’ll be on welfare. But it all seems too good to me, so I keep buying.

But be careful, investing in China can be very risky, they aren’t exactly the most ethical and forgiving markets. Proceed with huge ballz.

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