My BABA notes, I did post on the Fool pay site

Some of my BABA investment notes. As all my posts, this post is nothing other than a sharing of research. I very well may never discuss this position again, even if we exit, or buy more. This post is not a solicitation, suggestion to buy or sell BABA, nor an implication of such. Do your own DD!…

What a difference a day makes. Delisting much less of a concern effective with this mornings open. The stock was up 36.76% at $104.98.

As of today, BABA is our second largest holding.

These are from my notes on January 29, 2022 ($113.58)

It is my thesis that revenue and earnings will continue to grow in the >15% range. This is well below company guidance. 2021 was a year of regulatory reset, and although these regulatory uncertainties remain, I think the cycle has transitioned to a mid to late stage, with a focus on enforcement and implementation. The investment sentiment is weak, with a blood in the street’s scenario of ADR delisting concerns. Of course, weak consumption in China remains a drag on core revenues.

Cloud computing continues to grow, as well as Customer Management Revenues (CMR). CMR includes logistics, search, and other items. Overall CMR which now includes commission revenue, grew 20%. The increase was mainly driven by growth in average spending per merchant and the number of paying merchants. CMR accounts for 45% of overall revenue.

These are from my notes on January 4, 2022 ($122.60)

Daily Journal Co. (Charlie Munger) increases position FQE 9/30 by ~99%, and holds 602,060 shares as of December 31, 2021. Keep in mind that Munger only owns 3.6% of Daily Journal Co.

These are from my notes on December 17, 2021($121.16)

During analyst day the company reviewed many metrics, mostly they were quite positive. The company did not give visibility on the future, including spending needs, as well as they didn’t address the markets concerns of the company (delisting). Investors would like to know how the spending will lead to increased profitability, and by how much, and for how long.

The company said it intends to have 100 million paid members, between 88VIP and Taobao Pass in the “future,” up from more than 50 million as of October 2021.

These are from my notes on November 9, 2021($160.10)

Yield is 0.00% ($0.00). Earnings expected at $10.95 which would give a P/E of 14.62X. Dividend payout has averaged 0.00% for the last 7 years. The payout ratio was 0% in F2019, and 0% in F2020. Dividend payout ratio expected to be 0% for F2021 and 0% for F2022. ROE has averaged 19.36% for the last 7 years. ROE was 18.6% in F2019, and 15.9% in F2020. ROE is expected to be 19.0% for F2021, and 19.5% for F2022. ROTC has averaged 15.90% for the last 7 years. ROTC was 16.3% in F2019, and 14.1% in F2020. ROTC is expected to be 17.0% for F2021, and 18.0% for F2022. Average P/E for the last 7 years has been 24.76X. Projected eps for F2022 are $11.65 which equates to a forward P/E of 13.74X. VL gives it ‘B++’ financial strength, and a Safety rating of 3. VL projects a price of $280 -$420, between 2024 – 2026 (11/5/21).

Shares outstanding projected to be 4,200 on December 31, 2021, and 4,300 on December 31, 2022.

S&P credit rating is ‘A+’ Upper Rung of Upper Medium Grade Outlook Stable (11/24/14).

Moody’s credit rating is ‘A1’ Upper Rung of Upper Medium Grade Outlook Stable (8/29/19).

Fitch credit rating is ‘A+’ Upper Rung of Upper Medium Grade Outlook Stable (10/6/21).

On March 14th I answered an investor question on the pay board, as they were inquiring if BABA should be bought or sold. Here was my response.…

In 10 years or so, you could have two different responses.

  1. Let’s assume BABA was delisted and CCP nationalized it, and all shareholders held worthless shares. Of course, many will brag that they discussed this company was not investible. There could be validity to that.

  2. Let’s assume that BABA had no SEC issues, including delisting, and that CCP continues to allow profitable companies to work on the world markets, no differently than many USA markets have operated for that way for over 150 years. If this is the case, we might look back and realized these days of sub $100 share price was an historic buying opportunity. Those will claim that P/E’s, P/CF, ROE, and P/S as an example, were trading at blood in the street multiples, and the kind of buying opportunities that are few and far between over the last 150 years. Let’s assume the company operated profitably, and shareholders were paid accordingly for the long-term profitable fundamentals. There could be validity to that argument.

There is no right or wrong answer here, as today the question and answer would be one of speculation.