Dear Readers of this blog
I have not written any posts other than performance update for quite a while. That is on me. I have been overwhelmed with life in general as I am sure many of you are in a similar way, and in some cases, in a stronger way.
In January of 2022, I was tested positive for Covid. That was the moment I had to put aside everything to focus only on one – the health. No more 5:30am morning runs. No more conference calls throughout the day. Everything was giving way to recovering from Covid. Luckily, I only had three days of fever and after 2 weeks since symptoms onset, I was (almost) fully back.
Weirdly, this episode also gave me some down time that is truly belonging to myself, an experience I did not have since, maybe 12 years ago when I met my wife. Such “solidary confinement”, due to Covid-19, give me some time to think and appreciate a lot more for what I have in life, rather than what I have been chasing in life. I am sure I will miss this in the future. And I hope to reserve some time to do self search again, hopefully not through another illness.
Investing is still my passion, whether I write about it or not. Identifying value is almost like a sport to me and I like that challenge.
JD/BABA/Tencent has been battled down significantly since 2021. In the case of Alibaba (BABA), currently it is traded at $100/share, a 1/3 of its peak of $300/share in Oct 2020, half of the value from a year ago (March 2021).
It is traded at approximately 12x forward PE. ~ -$50 billion net debt (yes they have negative net debt). And cash on balance sheet is worth half of their book value.
Similarly in the case of JD.com, it is traded 35% off its all time high made in Feb 2021, 35x forward PE, ~ -$25 billion net debt (another negative net debt), Cash Per Share is almost double its Price per Share.
Net Tangible Value per share for JD.com is approximately $51/share and in BABA’s case, $26.44/share.
I would argue that for companies that have growing their top line in the most difficult year (2021) by 16%, without little to no debt, we are seeing a systematic undervaluation and I have not identify similarly valued growth companies in US.
We continue to be buyers of Chinese equities with strong balance sheet, diversified business lines and strong revenue growth track records and future potential.
Good things will happen, maybe not now, but eventually.
No matter how you look at it, or historical context, Russia’s “Special military operations” in Ukraine is outright unprovoked invasion. This should not happen in any year, not to mention 2022. We are NOT in a cold war era. We are NOT in an era just post WWII. We are in technology advanced years that hot war should not happen.
What is the end game of Russia invasion? My guess is that Russia will make it worse before the situation gets better. It won’t easily bow to sanctions. There may be future conflicts at control level between Russia and some NATO countries. And I certainly hope there is not a hot nuclear conflict. If the war drags longer, Russia will be at a lot worse situation that Ukraine because War is expensive. Ultimately a drawn-out war is a test of a country’s economic strength, rather than resolve of some leaders. Russia does not have that economic power to drag this war longer.
My projection is that we don’t have a mutually destruction by nuclear weapons. This Russia invasion may last longer than your bank account can stay solvent. So if you are betting the war to end and markets to rebound, make sure you have enough dry powder and staying power. Consistency is key in the buying of every scare moments in a war.
But the bottom line is, there should not be a hot war to begin with. Russia is dragging everyone backwards to the old days. We should refuse such backward movement.
Putin needs to go.
Only silver lining is that there is a chance to buy great companies at a discounted price, after we pray for the life lost in this ridiculous war.