Wilmar at $3.00 per share. More on Alibaba.

Quite a few readers and viewers have been asking me on and off this year whether I was adding to my investment in Wilmar.

I think more people asked me when Wilmar's stock price went down to $3.20 and $3.10 per share.

I kept saying that I was waiting for $3.00 per share.

Briefly in August, I thought I might get it but it didn't happen.

Well, it finally happened.

My overnight BUY order at $3.00 per share was filled.

Wilmar International is very undervalued if we were to look at the sum of its parts.

Its majority held YKA in China has a larger market cap than Wilmar in Singapore.

So, buying Wilmar today, we are getting the rest of its businesses for free.

This is something I have said for a long time.

Of course, a stock could stay undervalued for a long time too.

Those of us who track the counter know that insiders are consistently adding to their positions.

Historically, at $3.00 per share or lower, we have seen even more insider buying.

Wilmar's business in China is not performing as well as before as the Chinese economy is still suffering from the meltdown of its property sector.

Consumers are still cautious and are not spending as freely as before.

Historically, Wilmar also did share buybacks during times of lower earnings as its share price got punished as a result.

At current prices, downside is probably limited.

I also like that Wilmar has been consistent in paying dividends through good and bad times.

They did not suspend dividends during the pandemic, for example.

The dividend per share of 17c isn't demanding as expectation is for earnings per share to be about 30c in 2025.

Buying at $3.00 per share gives me a dividend yield of 5.66% and an earnings yield of about 10%.

Of course, readers who have been watching my  YouTube videos on the banks would be familiar with the concept of earnings yield. 

Wilmar is still one of my larger investments and it fits my primary strategy to invest in bona fide income generating assets which will pay me through good and bad times.

I thought I would end 2024 without buying any equities but after initiating a position in Alibaba Group last week, I have added to my position in Wilmar today.

Many regular readers were curious why I invested in Alibaba Group last week.

I have made videos about Alibaba and how I thought it was trading like a value stock.

Despite that, I wasn't ready to jump on the bandwagon because of policy risk in China.

Alibaba also didn't use to pay a dividend but not too long ago, they started to pay dividends, very little in dividends.

The dividend yield is less than 2% with a payout ratio of about 20%.

So, it is a very sustainable dividend.

Alibaba has very healthy cashflow and very strong balance sheet.

Instead of paying more dividends, Alibaba has decided to do share buybacks.

I must agree that doing share buybacks at such depressed valuations is probably a good idea.

Alibaba has already bought back some 10% of its outstanding shares, if I remember correctly.

All else being equal, share buybacks will lead to earnings accretion and we should see a lower PE ratio.

Paying HK$80 per share today is a better deal than paying HK$80 per share two years ago.

Having said this, Alibaba is a small position in my portfolio and although I could add to my position if the stock price declines another 5%, it will probably remain small.

Why 5%?

There is some support for a mild uptrend if we connect all the lows in its stock price seen this year.

Even if there is another 5% decline in its stock price, this mild uptrend would still be intact.

If the support holds, the worst could indeed be over for Alibaba.

When a viewer asked what the stock price for Alibaba is going to be like in future, I said I didn't know how the price is going to move.

However, I know that the 13 years median PE ratio is about 30x which means that if Mr. Market decides to like Alibaba again, all else being equal, its stock price could double from here.

Well, I wouldn't hold my breath.

Undervalued can stay undervalued for a long time and it certainly seems to be the case for Alibaba.

Whether stocks or socks, just like Warren Buffett, I like to buy when they are marked down.

Merry Christmas!

Related post:
Wilmar: Free stuff!

AK is buying Alibaba shares!

I didn't think there would be another blog post until the new year but I did something just now which would have surprised myself a few months ago.

I bought some Alibaba shares.

If you are rubbing your eyes to read that again, I know how you feel.

However, if you have been following my YouTube channel, you would have heard me talking to myself about how Alibaba at HK$80 a share looked attractive even to value investors.

I just didn't like the policy risks in China and I also didn't like that they paid so little in dividends.

Well, better than no dividends, I guess.

Alibaba is fully capable of paying higher dividends given their healthy cash flow and balance sheet.

They have instead decided to buy back shares which, of course, increased the value of the outstanding shares.

Alibaba isn't dreadfully overvalued like Tesla.

Some readers might remember I made a video comparing the two.

I said that if I had to choose, I would invest in Alibaba and not Tesla.

Well, Mr. Market has gone on a Tesla buying spree and ended its brief fling with Alibaba.

Anyway, what made me change my mind?

More accurately, who made me changed my mind.

I had a chat with a friend who is invested in Alibaba.

He knows my stand on Alibaba and he agrees that there are policy risks.

China is not a free market economy.

The many ways we use to value stocks conventionally are not able to put a numerical or monetary value to these risks.

Yet, he is willing to take the risk because Alibaba just looks relatively cheap, a point which I am in agreement with.

When he saw me smiling, he asked,

"Do you think I am kum gong?"

I laughed at that because he obviously watched the video I produced on how a fellow YouTuber called me that for buying shares of DBS at higher prices.

He went on to say that if I was willing to buy Bitcoin after being convinced that the digital currency had value, why not buy some shares of Alibaba?

The important thing is to invest an amount of money that's similar to what I used to buy Bitcoin.

Or do not invest more than what I feel I am OK to lose if Alibaba gets shut down by the CCP.

I came home and I gave it some thought. 

Alibaba isn't something I must buy but I do like the idea of investing in a fundamentally strong company which Mr. Market dislikes.

Like what Warren Buffett said before,

"Be greedy when others are fearful."

Well, I am not going to be greedy here but I don't mind having a sampler.

So, thanks to my friend, I am a newly minted Alibaba shareholder now that Alibaba is back at HK$80 a share.

It helps that we can buy Alibaba shares in the form of SDRs or Singapore Depository Receipts in SGX now.

I like to keep things simple.

I think this will be the last video for the year but, of course, never say never. 

If AK can do it, so can you!