No. of Recommendations: 12
at the end of the "old" TMF boards I similar posts here and on the "Falling Knifes" board, kind of: "After that extreme fall BABA now is sooo cheap, GOOGL now is sooo cheap ... DIS ... AMZN ... " etc.
I disagree. The difference is that folks, including myself, advocating for the value proposition of BABA or GOOG last fall were doing so based on objective valuation metrics rather than mere price declines. At $65 last November, BABA was objectively cheap. It was trading at a PE well under 10. This is an absurd price for a company growing earnings and revenues at the rate BABA has been growing. This is a company that at one point during its decline was worth $170 billion with $70 billion in cash on its balance sheet! Obviously there are sound political reasons for staying the hell away from BABA, and China in general. First, it's not a free enterprise economy and the owners of BABA are always at risk of some form of expropriation. Second, US investors own it through an ADR with no tangible or enforceable stake in the company. We profit at the will of Xi. Third, the $70 bil in cash may not ever belong to BABA since the CCP has already set the precedent that Chinese corporate profits ultimately belong to the state. All of these are reasonable fears and rational reasons not to invest. However, if these do not explode in the face of the investor, there is reason to expect pretty fabulous returns if and when the bad news subsides. I think we have already seen some of that this past week.
The same could be said of GOOG. Sure the price has declined, and continues to flounder, but that is not the reason given for recommending a purchase at these prices. The company is trading under 18 times ttm earnings, which rarely happens, as well as a relatively low PS of under 5. The risks are obvious: chatgpt displaces google's algo for search, a recession kills its ad revs, a nuclear war breaks out in the Ukraine. The risks and fears are ever present. However, should these fears fade ... watch out!
