Don’t Touch Alibaba, Buy This Instead

Alibaba

Another day, another reason to avoid Chinese stocks. Ray Dalio might be willing to take a stab at companies like Alibaba with other people’s money, but I’m still steering clear. The latest sign that problems remain for this economy came with Alibaba’s earnings report this morning. It was ugly. Very, very ugly.

Shares of Alibaba Group (NYSE:BABA) are now off more than 37% over the last year, and today’s 11% slump was more of the same. China’s largest e-commerce company has taken a beating after a massive earnings miss and a large cut to its sales forecast. 

Now, I speculated on this stock, and I lost money. I’ll be upfront about it. My hunch was that this was going to be a stock that might rebound after people like Ray Dalio and Charlie Munger said that there might be value here. I thought to myself: What if they know something that I don’t?

Well, I paid a lot of money to be correct about the company, and it’s a reminder that I’m bearish on China for the foreseeable future. Alibaba stock took a beating after the Chinese government cracked down on their tech sector in October. 

Now, the numbers look weak, even as we approach the nation’s holiday season. The company had projected year-over-year growth of 30%. But today’s report signaled that it would only grow by 20%. I know – that is still solid growth, but this market expects and demands exponential growth for the company. Earnings fell by 32% from 2020. I am steering clear.

Value Where?

I tend to avoid investing abroad because I know the rules of the U.S. markets and I’m not overconfident in my knowledge of what’s happening abroad. But there is one stock that I am willing to buy and hold into perpetuity. As you know, Tesla (NASDAQ:TSLA) remains the heavyweight in the global electric vehicle industry. But people forget that in two years, Tesla will be overtaken by a competitor. 

That competitor is Volkswagen (OTC:VWAGY). Volkswagen struggled before the EV craze due to the emissions scandal that ruined its reputation for a few years. But Volkswagen is going to be the world’s largest producer of EV. 

While markets are going wacky for Rivien and Sono Group, I look at Volkswagen and believe it to be an incredible value. And the way that I want to take advantage of VW is to own its parent. 

Porsche (OTC:POAHY) owns 53% of VW and a variety of other brands. The stock currently trades at 0.64 price-to-tangible book value. That’s right… you could liquidate POAHY tomorrow and the stock would be worth much more – $14.64. I think that you can buy POAHY and not look at it for a few years.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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