Short thread/ $BABA future returns

$BABA returns on incremental invested capital (ROIIC) over past 9yrs is ~18%. Over the past 3yrs it was ~19%. Reinvestment rate over the same time periods was 130% & 102%. That has lead to intrinsic value compounding of 23% & 19% respectively
1/ With Alibaba Cloud requiring a lot of capital and just beginning to approach profitability, I have no reason to believe $BABA won't maintain a similar reinvestment rate & returns over the next 5 years..
2/ The core commerce business will continue to be extremely profitable and produce strong cash flows & returns for the business. I think it's hard to argue otherwise, regardless of any upcoming government crackdowns & interventions.
3/ Therefore, I see no reason $BABA wont continue it's historical reinvestment rate of >100% & returns in the range of 15-20% over the next 5yrs. Let's say 15% to be conservative. That implies an intrinsic value compounding rate of 15% (100% * 15%).
4/ As a bonus, $BABA are currently buying back $15B of shares at the cheapest multiples they have traded in the last decade. If we see even a slight multiple re-rate over the next 5yrs + the buybacks & the intrinsic value compounding, annual returns should be approaching ~20%
5/ Disclosure: long $BABA

Clearly there are a lot of risks involved in any Chinese investment right now. I am personally comfortable with the risk/reward even though most people aren't. Weighting on a $BABA bet is very important.

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More from @frankinvesting

14 Sep
Thread/ $HIFS - A high quality, small-cap bank with exceptional management.

1/ Hingham Institution for Savings was founded in 1834 as a mutual savings bank in Boston, Massachusetts. It eventually listed in 1988.
2/ $HIFS currently have 11 locations, 8 of which are in the South Shore of Massachusetts. The have also recently expanded into Washington D.C in which management recognise as a similar market and a growth opportunity.
3/ Currently $HIFS has a market cap of $680M. Since 1993 when the Gaughen family took full control of the bank, the stock has returned 100-1 for shareholders. Pretty impressive considering how small the company still is.
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13 Sep
Thread/ $BABA news on the CCP breaking up Alipay lending business.

1/ The media and fintwit are again jumping on the news and pushing an overly negative spin on the impact of the CCP breaking up the Ant Group’s credit/lending business.
2/ it was announced that the CCP plans to break up Ant Group's Alipay and create a separate app for the loans business, the Financial Times reported.
3/ The plan will also result in Ant turning over the user data that underpins lending decisions to a new credit scoring joint-venture that will be partly state-owned.
Read 16 tweets
7 Sep
Thread/ $BABA & the value Alibaba Cloud

Alibaba cloud is arguably the most bullish aspect of the $BABA thesis even though it’s <10% of FY21 total revenues and not yet profitable. Currently they have ~40% of cloud market share in China.
1/ The cloud market in China is only in early stages of development. They are approximately 5-6 years behind the US if they can replicate the same growth trends that a company like $AMZN has been able to achieve with AWS.
2/ the US and Chinese cloud market is very different and not a perfect comparison. But $AMZN & $BABA are the dominant players in each market so I will make some comparisons throughout the thread.
Read 12 tweets
5 Sep
Thread/ the Israeli micro-cap version of $V & $MA

$SHVA operates payments systems for debit cards and mobile payments (Apple & Google pay) in Israel. If it traded on any major exchange would likely be >2x the current price.
1/ first note is that $V & $MA are not competition. They don’t compete in the market and actually own ~10% of $SHVA shares each. The company was founded by Israeli banks.
2/ Shares are very illiquid. Large share holders such as the banks, Visa & MasterCard own ~60% of the company. The illiquidity is the main reason the company trades and such low multiples. Trading on Tel Aviv stock exchange doesn’t help either.
Read 6 tweets
3 Sep
Thread/ $BABA recently announced a 100B RMB contribution to common prosperity in China. The equivalent of $15.5B (USD).

Here is a bit of a deeper look and the impact in may have on Alibaba…
1/ firstly, I want to clarify the wording that was used. The $15B would be “an investment in science and technology to support small and medium-sized companies to enter the global market, increase employment rates and help reduce inequality between urban and rural digital life”
2/ $BABA will spread the money between 10 initiatives over the next 4-5 years. Unlike $TCEHY who did not give a time frame on their contribution, Alibaba have an end date of 2025. Both of the tech giants pledged the same ~$15.5B amount.
Read 8 tweets
3 Sep
Thread/ My Portfolio.

As of May, 2020 I decided to switch from index investing into stock picking with the hopes of out performing the market.

Cumulative return - 70%
YTD return - 22%

s&p500 since May, 2020 - 55%
s&p500 YTD - 23%
1/ I have outperformed the s&p500 since inception by 1500bps and YTD I am lagging by just 100bps.

Usually I benchmark against $VDHG which is a globally diversified ETF in Aus. However the S&P500 has performed better and I thought it would be a better comparison for fintwit..
2/ My current portfolio:
$KPG, $BABA, $TECHY, $PROSY, $AFL, $OTW, $TWTR Image
Read 8 tweets

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