As YR 2019 draw to a close this month, I would like reflect on the some of most significant events in my investment for the year. It had been a very good year for me, the best year in term of investment return as almost all Indexes reaching record high. There are so many investing journeys that I would like to post in this blog, however I had difficulties in finding time to write more posting.
Today, I would like to write about one of my greatest investment journey, ALIBABA, ticker BABA. I had written several posting on Alibaba for YR 2017 and 2018, you can refer to my previous article. This year the effects multiplied due to trade war and the Hong Kong IPO. I will end this year in my last posting next week with a summary of my trade for 2019.
ALIBABA IPO
I think Alibaba's decision to list new share in Hong Kong is a brilliant move. For those who had invested in anticipation for HK IPO had already making a good ROI. Congratulations for those warriors who took the bets. Again, congratulation and I think this is just the beginnings of a great journey.
WHY Jack Ma??
I had been investing in this company for past 3 years because I believe in Jack Ma's vision. The company is at the epicenter of "Mega trends" of changing consumer's lifestyle. I believe this trend will continue for multiple years.
The quality attributes that I like about Alibaba (from previous posting):
1. Right business model at right market trend
2. strong economic moat - King of the jungle
3. high growth rate, >40%
4. Low PEG ratio <1.0
5. Very profitable, positive cash flow
The right key to Treasure Chest
What is the key for profitable trade? The KEY is the timing for entry in any investment. Any external events can create a perfect setup for right entry point in profitable investment. As for Alibaba, the US-China Trade War is the "KEY".
Turning Crisis to Opportunity
During the peak of heated arguments between Xi and Trump in early 2019, US listed Chinese companies become the victims. I have not seen such level of fears in the market and the fierce downgrade had create gigantic risks that no one dare to buy. The dropped from $210 (where I sold all my BABA stock in 2018) to $130, many investors were running for exit. I saw a great opportunity to accumulate more BABA stock during the crisis.
Feasting during the harvest
External crisis had no effects on Chinese consumer's sentiment as they continue to spend, Alibaba continue to registered record profits quarter after quarter. It helps to push the share price to recovery mode. I finally sold all my holdings above $180 in March 2019. My return on investment was >20% in 3 months.
Personal notes:
I don't believe in diversification. Using diversification to manage risk is very popular among investors. However, this method will also dilute your returns in long run. Even though you have higher chance of hitting multi-baggers, you also have equal chance of hitting landmines. Many of us who are not full time investors, does not have the luxury of time to study reports, monitor and strategize for 30, 50 or 100+ stock counters.
In summary, diversifications will not bring much benefits to your bottom lines with low stock's ROI and huge efforts required/ time wasted.
In my portfolio, I always limit my holding to maximum 10 stocks or less at any given time horizon. I invest in very limited stock counters. Making very few trades per year but I make sure each stock's ROI is significant. I would spend great amount of time to study the stock and strategized my investing plan to manage my risk. Once I have decided to invest, I would move in and hold a very large positions that will have significant impacts to my bottom lines when the stock price move either way.
Why would I want to waste my precious time and effort investing that doesn't make significant impact? I would rather spend time relaxing at wonderful resort in Bali, than suffer mentally and emotionally to trade for penny return.
Simple calculation of if your time worth the trade you make. look at how much you make per hours as employee in the company and multiply by how much time you spend on making a trade. If it doesn't give you >3 times of the returns, don't bother to trade. Just focus on your daytime job and buy mutual funds. Or hire a fund manager to manage for you.
Finally, this is my favorite song from Stephanie Ho, "True Lovers" from TVB drama "Run Over Run" theme song.
-William Cheng
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