Alibaba: Following Michael Burry

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Alibaba: Following Michael Burry

seekingalpha2023-02-16

AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...

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Comment（7）

T.Dot
·2023-02-17
Great
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1
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GggSlimeR
·2023-02-17
Thanks & Do not like my comment
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来人
·2023-02-16
Ok
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jgaldon
·2023-02-16
Hhundreds millions of users and relevant in more than China. "Just" tested liquidity at 58, sitting there since 2015...it is a hold for a long period, even if it breaks down again for months, not taking partial profits until 180 or so (more than double my average) That's how bullish I am on this one
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- WG1:
  好的
  2023-06-06
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Quantum Leap
·2023-02-16
Yea , my hope to fire those CECA and ang mo balls
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Andrina A
·2023-02-16
Ok
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Deonc
·2023-02-16
ok
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One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9954444556,"gmtCreate":1676591982975,"gmtModify":1676591985775,"author":{"id":"4090234997856730","authorId":"4090234997856730","name":"T.Dot","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"4090234997856730","authorIdStr":"4090234997856730"},"htmlText":"Great","listText":"Great","text":"Great","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954444556","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9954457841,"gmtCreate":1676586782383,"gmtModify":1676586786232,"author":{"id":"4093058604760480","authorId":"4093058604760480","name":"GggSlimeR","avatar":"https://community-static.tradeup.com/news/4b805c8472adab6d9418f36452434a56","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":5,"crmLevelSwitch":1,"idStr":"4093058604760480","authorIdStr":"4093058604760480"},"htmlText":"Thanks &amp; Do not like my comment&nbsp;","listText":"Thanks &amp; Do not like my comment&nbsp;","text":"Thanks & Do not like my comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954457841","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9954467914,"gmtCreate":1676560083138,"gmtModify":1676560087776,"author":{"id":"3575544575320394","authorId":"3575544575320394","name":"来人","avatar":"https://static.tigerbbs.com/0af89587decbb8a1d3e1596adc29cb98","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3575544575320394","authorIdStr":"3575544575320394"},"htmlText":"Ok&nbsp;","listText":"Ok&nbsp;","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954467914","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9954485015,"gmtCreate":1676550917037,"gmtModify":1676550923885,"author":{"id":"3585783151794537","authorId":"3585783151794537","name":"jgaldon","avatar":"https://static.tigerbbs.com/7ac1bf876c504881c7cc0ca4968b92bb","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":7,"crmLevelSwitch":1,"idStr":"3585783151794537","authorIdStr":"3585783151794537"},"htmlText":"Hhundreds millions of users and relevant in more than China. \"Just\" tested liquidity at 58, sitting there since 2015...it is a hold for a long period, even if it breaks down again for months, not taking partial profits until 180 or so (more than double my average) That's how bullish I am on this one","listText":"Hhundreds millions of users and relevant in more than China. \"Just\" tested liquidity at 58, sitting there since 2015...it is a hold for a long period, even if it breaks down again for months, not taking partial profits until 180 or so (more than double my average) That's how bullish I am on this one","text":"Hhundreds millions of users and relevant in more than China. \"Just\" tested liquidity at 58, sitting there since 2015...it is a hold for a long period, even if it breaks down again for months, not taking partial profits until 180 or so (more than double my average) That's how bullish I am on this one","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/9954485015","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":106389414,"gmtCreate":1686036894961,"gmtModify":1686036907719,"authorId":4092445013571900,"author":{"id":4092445013571900,"idStr":"4092445013571900","authorId":4092445013571900,"name":"WG1","avatar":"https://static.tigerbbs.com/bd39f9423768d9f07a209b5f8d555038","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9954485015,"type":1,"supId":0,"prevId":0,"content":"好的","text":"好的","html":"好的"}],"langContent":"EN"},{"id":9954482312,"gmtCreate":1676550063037,"gmtModify":1676550066841,"author":{"id":"3571890748169729","authorId":"3571890748169729","name":"Quantum Leap","avatar":"https://community-static.tradeup.com/news/62c1a0916e804092ec6476da360446aa","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":6,"crmLevelSwitch":0,"idStr":"3571890748169729","authorIdStr":"3571890748169729"},"htmlText":"Yea , my hope to fire those CECA and ang mo balls&nbsp;","listText":"Yea , my hope to fire those CECA and ang mo balls&nbsp;","text":"Yea , my hope to fire those CECA and ang mo balls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954482312","repostId":2311464379,"repostType":2,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9954489594,"gmtCreate":1676546162019,"gmtModify":1676546166383,"author":{"id":"3581996887679255","authorId":"3581996887679255","name":"Andrina A","avatar":"https://static.tigerbbs.com/527aef2be2ecd5e3af8295747ad2b02f","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3581996887679255","authorIdStr":"3581996887679255"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954489594","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9954418864,"gmtCreate":1676541864559,"gmtModify":1676541868282,"author":{"id":"3569316529855154","authorId":"3569316529855154","name":"Deonc","avatar":"https://static.tigerbbs.com/d9aa45dd2eb58357f6477dcfb99d1415","vip":1,"crmLevel":3,"crmLevelSwitch":1,"idStr":"3569316529855154","authorIdStr":"3569316529855154"},"htmlText":"ok","listText":"ok","text":"ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9954418864","repostId":2311464379,"repostType":4,"repost":{"id":"2311464379","kind":"highlight","pubTimestamp":1676540726,"share":"https://ttm.financial/m/news/2311464379?lang=&edition=fundamental","pubTime":"2023-02-16 17:45","market":"us","language":"en","title":"Alibaba: Following Michael Burry","url":"https://stock-news.laohu8.com/highlight/detail?id=2311464379","media":"seekingalpha","summary":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing,","content":"<html><head></head><body><img src=\"https://static.tigerbbs.com/f2ca9a71c238ee6502ab070f9b40f1a4\" tg-width=\"750\" tg-height=\"500\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>AlexSava/iStock via Getty ImagesMichael Burry&#39;s fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a &#39;buy&#39;, the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.<h2>As For Me, I Like Hong Kong</h2>Michael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:<blockquote>As for me, I like Hong Kong. (12/04/2022, Twitter)</blockquote>More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:<blockquote>Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)</blockquote>He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.<img src=\"https://static.seekingalpha.com/uploads/2023/2/14/52756760-1676423859498847.jpg\" tg-width=\"640\" tg-height=\"425\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That&#39;s similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).<img src=\"https://static.tigerbbs.com/05eae8b1e28726fbf7e3eca97efe8779\" tg-width=\"640\" tg-height=\"366\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Bloomberg &amp; iFASTWhich also ties in perfectly with a tweet he made earlier:<blockquote>China&#39;s markets are having an &#34;America in early 2009&#34; moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)</blockquote>That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.<img src=\"https://static.tigerbbs.com/f54bcc4dccacf6a5e6f87a7135e7f48f\" tg-width=\"640\" tg-height=\"360\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can&#39;t know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.<img src=\"https://static.tigerbbs.com/62306af0dc157b7bd7c55261cfffbc97\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:<blockquote>Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That&#39;s the contrarian part of me.</blockquote>This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.<img src=\"https://static.tigerbbs.com/2f0ae04c0bcbff77d4cd3cf31517c133\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.<h2>Our Valuation Model</h2>Alibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.<img src=\"https://static.tigerbbs.com/74854b62d1d3f1cade9a557946e97153\" tg-width=\"635\" tg-height=\"417\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.<img src=\"https://static.tigerbbs.com/a8a15ded653c6fd4af156e1635071eab\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsThat&#39;s another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.<img src=\"https://static.tigerbbs.com/b4e2671e8cdb73e7af4d6ea11df5bb69\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.<img src=\"https://static.tigerbbs.com/de3bb042e7a9f1df676b23e1f83db58a\" tg-width=\"640\" tg-height=\"153\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba&#39;s cloud, which is still in its infancy at &lt;0.1% of China&#39;s GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO&#39;s 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.<img src=\"https://static.tigerbbs.com/5595e07f92a75dff651aea220517b89c\" tg-width=\"640\" tg-height=\"137\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.<img src=\"https://static.tigerbbs.com/bee84eaeeeb76c8e27809b1ec2c42405\" tg-width=\"640\" tg-height=\"124\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.<img src=\"https://static.tigerbbs.com/850dcf6f3da52f81affc926df126aff0\" tg-width=\"640\" tg-height=\"101\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that&#39;s a stunning 20.06% IRR over the next 10 years. We can&#39;t find many stocks with a higher IRR, frankly.<img src=\"https://static.tigerbbs.com/a3041e260a9c605af137c03a5317e80d\" tg-width=\"640\" tg-height=\"188\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Author&#39;s Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.<h2>The Kitchen Is Heating Up</h2>All that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a &#34;Strong Buy&#34; at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry&#39;s notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China&#39;s GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China&#39;s GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China&#39;s economic model, which can essentially be described as &#34;growth at any cost.&#34; As a result, China&#39;s economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China&#39;s real estate market.<img src=\"https://static.tigerbbs.com/0c1fd4ccb5691fe9c7eb653af1d65e10\" tg-width=\"600\" tg-height=\"400\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China&#39;s real estate to GDP ratio is about the same as Japan&#39;s in 1989, with a housing to GDP ratio of 3x.Currently, China&#39;s debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.<img src=\"https://static.tigerbbs.com/991d50b67f73b6f23e381ef74afc1456\" tg-width=\"602\" tg-height=\"395\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Deutsche BankChina&#39;s model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China&#39;s ever-growing trade surplus over the past 25 years is also a major factor in China&#39;s economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.<img src=\"https://static.tigerbbs.com/b2737f7ac29dab11ffa229b29b422a9b\" tg-width=\"640\" tg-height=\"375\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can&#39;t stand the heat, they should stay out of the kitchen.<h2>The Bottom Line</h2>Although China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alibaba: Following Michael Burry</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlibaba: Following Michael Burry\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-02-16 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4578529-alibaba-following-michael-burry>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nAlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has...\n\n<a href=\"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4099":"汽车制造商","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","09988":"阿里巴巴-W","LU0149725797.USD":"汇丰美国股市经济规模基金","LU0651946864.USD":"贝莱德新兴市场股票收益A2","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc","LU0289941410.SGD":"AB FCP I Dynamic Diversified AX SGD","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0211328371.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (MDIS) (USD) INC","BK4554":"元宇宙及AR概念","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","BK4532":"文艺复兴科技持仓","LU1046422090.SGD":"Fidelity Pacific A-SGD","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4523":"印度概念","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0079474960.USD":"联博美国增长基金A","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0312595415.SGD":"Schroder ISF Global Climate Change Equity A Acc SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","BABA":"阿里巴巴","BK4524":"宅经济概念","BK4559":"巴菲特持仓","BK4527":"明星科技股","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4526":"热门中概股","BK4122":"互联网与直销零售","BK4551":"寇图资本持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1688375341.USD":"贝莱德中国灵活股票基金"},"source_url":"https://seekingalpha.com/article/4578529-alibaba-following-michael-burry","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2311464379","content_text":"AlexSava/iStock via Getty ImagesMichael Burry's fund Scion Capital has just released its 13F filing, showing that the renowned fund, which became notorious for shorting the housing market in 2008, has taken a decent position in Alibaba (NYSE:BABA).We discuss why we strongly believe Alibaba stock to be a 'buy', the reasoning behind why Michael Burry presumably bought his 50,000 shares in the stock, along with our own valuation model and some unique macroeconomic insights.As For Me, I Like Hong KongMichael Burry alluded to his interest in Chinese stocks not too long ago, in a series of a few tweets. One of those tweets simply said without context:As for me, I like Hong Kong. (12/04/2022, Twitter)More importantly, he shared a statement earlier in October when the Hang Seng was heading for new lows around the 15,000 price level, the same levels at which the Hang Seng also traded in 1997. He had the following to say:Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of the last 4 Premiers served 3 terms. (10/25/2022, Twitter)He also shared the chart below, which clearly shows that the index has not changed much over the past 25 years.Bloomberg Terminal (Michael Burry)To give some context: Chinese stocks seem dirt cheap. Data on Chinese indices are quite scarce, but the data that can be viewed seem to indicate that China is in a bottoming out process at current price levels.If we look at the Hang Seng Index, as Michael Burry also pointed out, it typically trades at a P/E ratio of about 14x. And with 1 standard deviation down, it comes down to a valuation of 10x P/E. At the 7x P/E ratio he pointed out, when the index was trading around 15,000, it was trading more than 1 standard deviation below trend. That's similar to where it was trading during its lows in 1999 and 2009.The lowest valuation we could find in modern history was a P/E ratio of 6.1x in the early 1980s. Currently, the Hang Seng is trading around a P/E ratio of 8.46 or a CAPE ratio of 9.59x (TTM).Bloomberg & iFASTWhich also ties in perfectly with a tweet he made earlier:China's markets are having an \"America in early 2009\" moment. Fear and uncertainty are peaking or close to it But China is too important to America, 20X Russia. America cannot effectively fight or sanction China without spiting itself nearly as severely. Just ask @KingJames (09/21/2022, Twitter)That last statement may have been directed toward LeBron James and his attitude in the past. So from a historical and relative valuation perspective, it could well be that the bottom has already been reached for China.If we overlay the indices of the largest markets, presumably the U.S., China and Europe, they have traded relatively evenly in the past. That was mostly until about 2013, when the Hang Seng was consistently cheaper than Europe and the US. We think there is a good chance that this widening divergence will eventually reverse.BloombergAs for when Michael Burry bought his shares, the report reflects the shares he owned at the end of the fourth quarter. We can't know exactly what price Dr. Burry paid, but we do know that it was in the range of $63.15 and $94.17.For simplicity, we take $78.87 because that was the average price range where Alibaba shares traded in Q4 2022.Data by YChartsJust before Michael Burry started his Hedge Fund, he explained his investment strategy and applied it to case studies. In fact, Michael Burry uses Technical Analysis, but mainly for risk management and nothing too crazy.He stated this on Technical Analysis:Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That's the contrarian part of me.This is where it fits perfectly with Alibaba, as it went right back to where it was in 2015/2016, bouncing perfectly off its support around $58. We think there is a chance that Dr. Burry actually bought his shares below $66, or 15% above trend, although it is mostly speculation on our side.Data by YChartsStill, we think the stock becomes a strong buy when it gets into this $66 trading range. This is for valuation reasons we will explain, and because we can buy the stock and set a stop-loss at $58 in case Alibaba breaks through that support level, and limit losses to just over -12%.Our Valuation ModelAlibaba is perhaps one of the most undervalued companies we believe is currently on the market. Paradoxically, for a company that has seen its revenues grow at an average annual rate of 43.3% between 2013 and 2022, it is only trading at a Forward P/E ratio of 13.47x.Data by YChartsAnd this analogy can be extended across the board. Alibaba has experienced astronomical growth in terms of EBITDA, with an annual growth rate of 33.8%. Free cash flow has also grown tremendously, from $1.93BN in 2013 to $14.19BN in the past 12 months.This means that both our measures EV/EBITDA and P/FCF check out. We believe, in this case, that the rewards still far outweigh the risks by trading below 12x FCF or at a relatively normal 17x EV/EBITDA.Data by YChartsThat's another reason why it would be a great buy if it gets near those all-time lows. It certainly has the same characteristics as the opportunity to buy Amazon (AMZN) in late 2008, when it also bottomed around a 10x EV/EBITDA multiple and a P/FCF multiple of 15. However, we understand that Alibaba could still bottom at lower levels, as the U.S. has always traded at a certain premium to China.Data by YChartsFor us, Alibaba seems right on both an absolute and relative valuation, based on simple measures. Since we are long-term investors, we will look at how we see Alibaba for the future and where it could be in the next 10 years.First, revenue. Alibaba has experienced monstrous growth of more than 43% over the past 10 years, in the same exponential fashion as Amazon. There are many reasons to believe that this growth could continue for quite some time, although we have modeled our forecast more conservatively.After all, Amazon has managed to grow its sales by more than 24% over the past decade against all odds, from the same baseline which Alibaba is at right now. We still factored in a lot of headwinds for 2023, close to the Wall Street forecasts, as short-term forecasts tend to be relatively reliable. We also factored in headwinds for EBITDA margins, but expect them to return to healthier levels.Author's Valuation ModelA relative measure is that Alibaba will average an EBITDA margin of 33.8% between 2015 and 2020. We expect Alibaba's cloud, which is still in its infancy at <0.1% of China's GDP, to be a major driver of this growth, providing huge tailwinds in addition to domestic trade revenues, like has been the case for Amazon over the past decade.This is also in line with the expected CAGR of 12.4% that China will experience, according to market research. From a cash flow perspective, we have also modeled headwinds for 2023. We will explain our reasoning for these headwinds and a lower growth rate in the next section of our valuation. Our cash flow estimates are based on a linear growth rate closer to 12%, compared to the CFO's 33.6% growth rate over the past decade.In all of our models, we also consider stock-based compensation to provide a true picture of profitability, as stock-based compensation historically appears to be near 10% of revenue.Author's Valuation ModelCapital expenditures were also modeled accordingly and grow linearly with revenues. Our valuation shows an expected EBITDA of $70.66BN and FCFE of $40.74BN by 2032.So on an EV/EBITDA basis, taking into account cash and debt, we arrive at a market capitalization of about $1.00T around 2032, or $372.77 per share at a 14x multiple. We chose a lower multiple of 14, compared to the average of 16x, to account for the lower valuations in China relative to the US.Author's Valuation ModelOn an FCFE basis, as you can see below, we think Alibaba has the potential to generate $15.16 in FCFE/share by 2032. We again chose a fairly high FCFE yield of 6%, taking into account higher interest rates and the China discount rate. We arrive at a price per share of $252.74 on an FCFE basis.Author's Valuation ModelFinally, if we take both valuations together at a 50% weighting, we get our final estimate of $312.76 per share, or roughly a 200% increase over the current share price.In an IRR calculator, that's a stunning 20.06% IRR over the next 10 years. We can't find many stocks with a higher IRR, frankly.Author's Valuation ModelTo us, everything fits: there is a margin of safety on a technical analysis basis and current valuation basis, trading at low multiples. Even if growth were to disappoint, at an EV/EBITDA multiplier of 12x it can be considered an attractive value stock.In summary, the downside is relatively limited when looking at fundamentals, while the upside potential is absolutely enormous. As for the downside, there are quite a few risks.The Kitchen Is Heating UpAll that growth and opportunity sounds fantastic. So why do we think Alibaba is not yet a \"Strong Buy\" at current prices. Well, there are still a lot of daunting risk factors to consider.And getting back to Michael Burry's notion that GDP has multiplied 18 times while stocks have not really moved, we want to add some caveats. Because China's GDP and growth model can be a bit misleading. In this situation, the stock market may be the smartest one in the room, not GDP.While China's GDP has grown astronomically, there are reasons to believe that this rise will not last forever. One such reason is China's economic model, which can essentially be described as \"growth at any cost.\" As a result, China's economy has seemingly become more credit-driven in recent history. This came to light for most people with Evergrande in late 2021, which revealed the unhealthy and unsustainable growth of China's real estate market.PBOC, NBS, WSJAnd we have all seen what a credit-driven frenzy can look like, just look at Japan in 1989. Funnily enough, China's real estate to GDP ratio is about the same as Japan's in 1989, with a housing to GDP ratio of 3x.Currently, China's debt-to-GDP ratio exceeds the U.S., although it is still smaller than Japan, which takes the crown as the global leader in debt-to-GDP ratio.Deutsche BankChina's model of GDP growth at all costs, at the expense of wealth, must one day come to a halt. For example, it was recently revealed that China overestimated its population by 100 million and is shrinking for the first time in 60 years, contrary to what was previously believed to be a massively growing nation.Certain things such as China's ever-growing trade surplus over the past 25 years is also a major factor in China's economic model, although times have changed greatly since then. Will China be able to grow its surplus indefinitely, as it has in the past? We doubt it will.BloombergStill, even if certain elements of GDP are overestimated, there is much reason to believe that the Chinese stock market should not be where it was 25 years ago, as most people see that much progress has clearly been made since then.There are also reasons to believe that Alibaba will benefit because it is a company the government would rather not be without. It would be about the same as the U.S. trying to shut down Amazon. Too many jobs and too many consumers depend on the company, and it is seen as one of the most valuable assets in the economy. Anyone would have too hard a time getting rid of it.And maybe China is uninvestable. But we think Alibaba is one of the few that subverts that rule and still falls into our circle of competence, because of its sheer size, low valuation and its growth prospects. Or maybe, if investors can't stand the heat, they should stay out of the kitchen.The Bottom LineAlthough China may face some headwinds today and in the coming year, we think the market is in a bottoming out process and ready to trade above that Hang Seng trend line of 15,000.In our opinion, Michael Burry also probably sees China as undervalued, having bought 50,000 shares of Alibaba and some other Chinese companies. Based on EV/EBITDA and P/FCF, it is just too cheap to ignore, and the rewards currently seem to outweigh the risks with an IRR over 20%. If the stock returns to all-time lows, we consider it a strong buy.Those near-term headwinds, such as a macroeconomic downturn as we mentioned, or tensions such as recently with Chinese spy balloons ratcheting up tensions, should dissipate at some point in our view. And when that happens, Alibaba is poised to run.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":109,"commentSize":7,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}