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Michael Fritzell (Asian Century Stocks) Profile picture
@MikeFritzell
Aug 30, 2021 • 15 tweets • 5 min read • Read on X
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Agree on this... His views seem superficial
The take rate is not high... But to have confidence in the take rate you'd have to believe in the AUM number.

Are we sure cloud is not loss-making due to "national service", similar to Tencent's support of China's police IT infrastructure?
Would rather look at loss-making investments on a case by case basis. The unit economics may or may not work.
Simply cannot ignore the political aspects. Xi and Ma are not on good terms..

Why subtract Amortization? And even if you do, how does he get to 10x EBITA at the time or investment? I'm puzzled.
Why ignore the fact that Jack Ma is seemingly no longer running Alibaba?

Is it obvious that Alibaba will run more smoothly once the government's "redistribution" is over?
Didi's app was banned right after the capital raise. Clearly, loss of data cannot have been the only consideration. Doing so 1 month earlier would have stopped the IPO.
Jack Ma's case is not unique. Many Chinese tech CEOs have "quit" recently: Pinduoduo's, Bytedance's, etc.
Also not sure what the point is mentioning the sexual misconduct case, with a sample size of 1 over total employees of 250,000
In early 2Q21, Alibaba's EV was US$590bn.

EBIT of US$14bn + A of US$10bn = US$24 bn.

EV/EBITA = 590/24 = 24.6x? Doesn't compute.
I can't say that I know Alibaba as well as some of these tech experts. These are just random thoughts I had from reading the document. I genuinely don't understand.
God knows how Russo got to 10x EBITA. If he excludes all loss-making segments and adds back share-based compensation and amortisation then you get to US$30bn in EBITA and EV/EBITA of 20x.

He most likely subtracts value from cloud / media / new projects / investments in EV.
RV Capital values Alibaba on Core Commerce EBITA of US$35 billion.

So most bulls seem to use a SOTP to value the company, based on Alibaba's own allocation of revenues and expenses to its various segments.
RV Capital ignores the fact that many of recent policies come directly from the Communist Party's general office. They do not represent typical industry regulations.

But we'll see what the leadership's true intentions are...
I have to say that the RV Capital letter is more coherent and does try to address key bear arguments.

rvcapital.ch/post/first-hal…
And here is a link to Tom Russo's letter as well where he discusses Alibaba:

moiglobal.com/wp-content/upl…

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More from @MikeFritzell

Michael Fritzell (Asian Century Stocks) Profile picture
Jan 26
.@Nate93658762 suggested I read the annual report of Haad Thip HTC TB. Here's what I learnt Image
Haad Thip is a Coca-Cola bottler in Southern Thailand across 14 provinces. The typical brands, incl Coke, Fanta, Sprite, Minute Maid. Founded in 1969, two manufacturing plants. Seems to be a steady grower. 80% market share in sugar-sweetened soft drinks in the south. Image
91% sparking beverages and the rest non-carbonated (presumably Minute Maid). Image
Read 16 tweets
Michael Fritzell (Asian Century Stocks) Profile picture
Jan 4
When should you sell, if ever?

Let's dig into the literature
Michael Price: sell when earnings growth is coming to an end, for example 1) when the return on invested capital is declining 2) business recessions are coming 3) industry cycles Image
Philip Fisher: "If the job has been correctly done when a common stock is purchased, the time to sell it is - almost never"

Exceptions: 1) you made a mistake in your original appraisal 2) the company ceases to qualify under the same appraisal method Image
Read 11 tweets
Michael Fritzell (Asian Century Stocks) Profile picture
Aug 11, 2024
Loved the book Mao's America by @XVanFleet. It discusses the similarities between Marxism in the United States today and during the Cultural Revolution in China in the 1960s and 70s.

Here are the key takeaways from the book (1/x) Image
A core tenet of Marxism is about dividing people into groups: oppressors and victims. For example, capitalists exploiting workers, encouraging workers to engage in class struggle.

But in reality, Marxist ideas are used by power-hungry politicians to bring down their own enemies.
After the Communists took over, the party encouraged peasants to kill their landlords and take over their land. Yet just four years later, that same land was taken over by the government and turned into communes with poor incentive structures. Crops started failing.
Read 38 tweets
Michael Fritzell (Asian Century Stocks) Profile picture
Apr 24, 2024
I wrote a post about how to spot deception, based on the book Spy the Lie by Phil Houston and two other co-authors.

Here are the key take-aways from the book: Image
When trying to get at the truth, you'll want to ask specific questions and then 1) listen and 2) look for reactions from the other person to that question.

These reactions will include verbal such as failure to answer the question and non-verbal such as touching your face. Image
Questions intended to figure out the truth should be short, simple, singular and straightforward. They have to be so clear that the person has no way out except telling the truth.

A prologue statement explaining why a question is needed can increase cooperation.
Read 14 tweets
Michael Fritzell (Asian Century Stocks) Profile picture
Jan 12, 2024
Finally breaking even on my Substack after all personal expenses, after roughly 2.5 years. A huge weight lifted off my shoulders. And super grateful to be able to do what I love - turning over rocks in Asia.

I can't say that I've reached huge success, but a few lessons (1/8): Image
1. Write about a passion

If you manage money, you can easily take a few days off and read books or whatever.

If you're writing research, not so much. You'll feel pressure to produce. Which makes it super important that you have a passion for what you're writing.
2. Dominate your own niche

It's become crowded on Substack, and it was inevitable it was going to turn out that way. I'm no smarter than anybody, but luckily I managed to find a niche without too much competition.

You'll want to become *the guy* for your particular niche. Image
Read 10 tweets
Michael Fritzell (Asian Century Stocks) Profile picture
Dec 23, 2023
On Egerton Capital's John Armitage's investment style, sourced from James Morton's 1997 book "Investing With the Grand Masters" (1/x) Image
BACKGROUND

• Started at Morgan Greenfell, where he ran the European Growth Trust beating practically all of his peers
• Founded Egerton Capital in 1994 with William Bollinger, one of the early employees Nicolas Tangen now at Norges Bank
• Has managed money for George Soros
PORTFOLIO CONSTRUCTION

• Long/short strategy with varying net exposure
• Review portfolio each month as if starting from scratch
• Typically 40 stocks on the long side
• No position >8%, top 20 positions 65-85% of total value
• Top 10 positions uncorrelated
Read 10 tweets

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