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BABA Stock: Is Charlie Munger Error-Free with Alibaba?

Warren Buffet is still an inspiration for many investors. However, many also try to pay close attention to his longtime partner, Charlie Munger. The recent news that Munger’s...
BABA Stock: Is Charlie Munger Error-Free with Alibaba? © Reuters. BABA Stock: Is Charlie Munger Error-Free with Alibaba?

Warren Buffet is still an inspiration for many investors. However, many also try to pay close attention to his longtime partner, Charlie Munger. The recent news that Munger’s publishing company bought 165,320 shares of Alibaba Group (NYSE:BABA) took many in the market by surprise.

Alibaba is a world-class growth stock. However, it happens to be domiciled in China, a rather unforgiving place to do business these days.

That said, Munger, who is 97, is still active in the investing world. He sees value in China right now, and he's put up some of his spare cash from The Daily Journal Corporation (DJCO) into Alibaba as a vote of confidence.

Mr. Munger's investment actually came in Q1 of this year, before the tech "super crackdown" by Chinese regulators. Accordingly, Mr. Munger is still knee deep in the red with this investment.

However, according to his recent 13-F Filings, no shares of Alibaba were sold during the dip in share price. This indicates that Buffett's longtime partner is still bullish on Alibaba's long-term prospects. As am I.

Given that Alibaba is now a major holding of Munger, should investors follow in his footsteps? Or, is this stock simply one Munger has gotten wrong?

Let's dive in.

BABA Stock: Value or Growth Stock?

Despite rather strong recent earnings reports, Alibaba's status as a growth stock has been challenged.

By what, you may ask?

Well, by the company's startlingly low valuation. Alibaba currently trades at a valuation that approximates one-quarter of Amazon's (NASDAQ:AMZN), despite having eerily similar business models.

Investors are worried that Chinese regulators could simply regulate the growth out of tech. The Chinese Communist Party has been concerned for some time that shareholders may benefit at the expense of the average working person.

This is simply unacceptable in a communist environment, which is obviously at odds with the growth-oriented focus a capitalistic system provides.

Accordingly, investors don't really know what to make of Alibaba's historical growth.

With that in mind, Alibaba is starting to look like a hyper-growth play at a bargain-bin valuation. For long-term value investors like Munger, that's too good to ignore. However, for those with a weak stomach, this sort of volatility could be difficult to handle.

Buybacks?

Let's assume Alibaba will devote more if its profit moving forward to "enhancing the social good" in China. Where will that leave shareholders?

Indeed, earnings per share may have difficulty moving higher. If the company reinvests in lining Chinese regulators' pockets, or the CCP's budget, over reinvesting in its core business, eventually growth will slow.

However, if Alibaba is able to do both -- that is, reinvest in China but also buy back shares -- then it's possible investors could see meaningful EPS growth over time.

While a dividend may be out of the question for some time (if not forever), Alibaba has announced that it's raising its share buyback program to $15 billion from $10 billion.

The argument can certainly be made that Alibaba would not increase its share buyback program if it didn't see more cash flow and earnings on the horizon.

What are analysts saying about BABA stock?

TipRanks' analyst rating consensus considers BABA stock a Strong Buy. Out of 24 ratings, there are 22 Buys, one Hold, and one Sell recommendations.

The average BABA price target is $269.43. The price target lies between a high of $336 per share, and a low of $190 per share.

Bottom Line

Altogether, Alibaba looks like a great deal, if investors are ready to handle the risks associated with investing in China.

This is a stock that looks cheap, and then gets cheaper. Indeed, a "falling knife" may be an accurate way to describe BABA stock in recent months.

However, the fact that Munger is bullish on this stock long-term leaves little room for interpretation for value investors. This is now a growth stock, trading at a valuation that doesn't make sense anymore.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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22-09-2021 08:20:32 (UTC+7)

EUR/USD

1.1726

+0.0003 (+0.03%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (1)

EUR/USD

1.1726

+0.0003 (+0.03%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (1)

GBP/USD

1.3672

+0.0013 (+0.10%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

USD/JPY

109.36

+0.15 (+0.14%)

Summary

↑ Buy

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (8)

Sell (0)

AUD/USD

0.7255

+0.0024 (+0.33%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (9)

Sell (0)

USD/CAD

1.2792

-0.0023 (-0.18%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

EUR/JPY

128.23

+0.20 (+0.16%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

EUR/CHF

1.0833

+0.0009 (+0.09%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (5)

Sell (2)

Gold Futures

1,776.25

-1.95 (-0.11%)

Summary

Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (4)

Sell (4)

Silver Futures

22.740

+0.129 (+0.57%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (1)

Copper Futures

4.1845

+0.0745 (+1.81%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

Crude Oil WTI Futures

70.97

+0.48 (+0.68%)

Summary

Buy

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (4)

Sell (3)

Brent Oil Futures

74.74

+0.05 (+0.07%)

Summary

Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (2)

Sell (4)

Natural Gas Futures

4.813

+0.010 (+0.21%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

US Coffee C Futures

183.70

+1.10 (+0.60%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

Euro Stoxx 50

4,097.51

+53.88 (+1.33%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (0)

S&P 500

4,354.18

-3.55 (-0.08%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

DAX

15,348.53

+216.47 (+1.43%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (7)

Sell (0)

FTSE 100

6,980.98

+77.07 (+1.12%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

Indicators:

Buy (10)

Sell (0)

Hang Seng

24,221.54

+122.40 (+0.51%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (2)

Sell (2)

US Small Cap 2000

2,190.36

+8.15 (+0.37%)

Summary

↑ Sell

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (1)

Sell (6)

IBEX 35

8,756.00

+100.60 (+1.16%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (5)

Sell (1)

BASF SE NA O.N.

62.280

+0.620 (+1.01%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (8)

Bayer AG NA

45.70

+0.47 (+1.04%)

Summary

↑ Buy

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (7)

Sell (1)

Allianz SE VNA O.N.

187.45

+3.59 (+1.95%)

Summary

↑ Buy

Moving Avg:

Buy (7)

Sell (5)

Indicators:

Buy (8)

Sell (0)

Adidas AG

281.90

+1.38 (+0.49%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (1)

Sell (6)

Deutsche Lufthansa AG

8.377

-0.287 (-3.31%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (8)

Siemens AG Class N

145.32

+3.06 (+2.15%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (2)

Sell (9)

Deutsche Bank AG

10.095

-0.135 (-1.32%)

Summary

Buy

Moving Avg:

Buy (6)

Sell (6)

Indicators:

Buy (6)

Sell (3)

 EUR/USD1.1726↑ Buy
 GBP/USD1.3672↑ Buy
 USD/JPY109.36↑ Buy
 AUD/USD0.7255↑ Buy
 USD/CAD1.2792↑ Sell
 EUR/JPY128.23↑ Buy
 EUR/CHF1.0833Buy
 Gold1,776.25Buy
 Silver22.740↑ Buy
 Copper4.1845↑ Buy
 Crude Oil WTI70.97Buy
 Brent Oil74.74Sell
 Natural Gas4.813↑ Buy
 US Coffee C183.70↑ Buy
 Euro Stoxx 504,097.51↑ Buy
 S&P 5004,354.18↑ Sell
 DAX15,348.53↑ Buy
 FTSE 1006,980.98↑ Buy
 Hang Seng24,221.54Neutral
 Small Cap 20002,190.36↑ Sell
 IBEX 358,756.00Neutral
 BASF62.280↑ Sell
 Bayer45.70↑ Buy
 Allianz187.45↑ Buy
 Adidas281.90↑ Sell
 Lufthansa8.377↑ Sell
 Siemens AG145.32↑ Sell
 Deutsche Bank AG10.095Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,660/ 5,710
(10/ 10) # 821
SJC HCM5,645/ 5,710
(0/ 0) # 821
SJC Hanoi5,645/ 5,712
(0/ 0) # 823
SJC Danang5,645/ 5,712
(0/ 0) # 823
SJC Nhatrang5,645/ 5,712
(0/ 0) # 823
SJC Cantho5,645/ 5,712
(0/ 0) # 823
Cập nhật 22-09-2021 08:20:34
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RON 95-IV2149021910
RON 95-II,III2139021810
E5 RON 92-II2014020540
DO 0.05S1602016340
DO 0,001S-V1637016690
Dầu hỏa1508015380
ↂ Giá dầu thô thế giới
WTI$70.86-0.12-0.17%
Brent$74.00+0.680.90%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.630,0022.860,00
EUR26.007,0827.360,60
GBP30.295,3831.561,13
JPY203,28215,04
KRW16,6220,24
Cập nhật lúc 08:16:20 22/09/2021
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