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Invest in Alibaba Group? High risk, high reward? (Updated on 3 Dec 21.)

Thursday, November 18, 2021

A reader left me a comment asking me to talk to myself on Alibaba as an investment but requested that I do not publish the comment.


Apparently, he followed the advice of a local blogger and got it at a share price of $220 and is now very worried especially after reading in the news that Temasek Holdings has started trimming their stake.

Article from The Business Times: HERE

The reader told me the name of the blog and because I know the blogger he mentioned, I went and took a look. 

I had to ascertain if the blogger indeed advised his readers to buy into Alibaba.




After looking at the blogs, I do not think the blogger meant to push readers to buy shares of Alibaba but one blog title went "If you have not bought a position in Alibaba, NOW is the right time to do so."

Yes, all 3 letters of the word "now" are in caps.

That was back in July this year and I see why it could easily be interpreted as investment advice to his readers.

I haven't blogged about Alibaba because I don't really have an interest in Chinese companies.

OK, I did mention Alibaba in a blog a couple of months ago in September and if you are interested, read: 





I haven't invested in a Chinese company since China Minzhong and readers who have been following my blog for a long time might remember the name.

Newer readers might be interested in this blog: 


The blog isn't just about China Minzhong and, so, it should be an interesting read for most.




To the reader who wrote to me about following the blogger and investing in Alibaba, I can only say that all of us should have our own plan and not just ride on someone else's coattail.

The blogger could have vastly different circumstances, risk appetite and even goals compared to his readers.

Without a thorough understanding of the blogger and checking to see that we are wearing the same shoes as him, it would be very hard to stomach paper losses especially big ones.

Why is this so?

Well, it is because we would be going in with only the thought (or dream) of making money.

So, when we lose money instead, we get hit and it could hit very hard for some.




For example, another reader followed a famous local trader and bought into Noble Group a few years ago.

What happened?

See: 

In that blog, I said that if we wanted to own a zhi char store, we must know how to handle a wok.

Rely on someone else to do the work and we are at his mercy.




So, how do we prevent ourselves from getting into a situation like the reader who wrote to me about Alibaba has found himself in?

Of course, some might also be interested on when might be a better time to invest in Alibaba?

Read the blogs which I have linked earlier in this blog and you will have an idea.

Peace of mind is priceless and it is not something to gamble away.

When people say "high risk, high reward," we have to pay more attention to "high risk" and what it means if things go wrong.

Focus on "high reward" instead and money might not be the only thing we lose.

Of course, AK is only talking to himself like the crazy fellow that he is, as usual.
-------



UPDATE: 3rd December 2021.

For those inclined towards Technical Analysis, remember that the trend is our friend.

Don't fight the trend.








I waited for the dust to settle during the last bear market and for share prices to find a bottom before increasing my investment in the local banks.

If I were interested in investing in Alibaba, I would do the same.

Related posts:



19 comments:

NerdLibrarian said...

Hi AK

Thanks for your blogging and showing us the way to FIRE.
Have you ever looked at Keppel Pacific Oak and what do you think of it?

What made you choose Neverwinter out of the MMORPGs out there?

AK71 said...

Hi NerdLibrarian,

I must remind readers that I am just talking to myself here in ASSI and also that it is never my way or the highway. ;)

There are many legitimate ways to achieve F.I.R.E.

As for Keppel Pacific Oak US REIT, I don't have a good impression of Keppel when it comes to REITs and it is because of K-REIT or Keppel REIT as it is now called.

See:
K-REIT: 17 for 20 rights issue.

Also, I have avoided investing in REITs with a USA focus like Manulife US REIT because they have to do something to go around the withholding tax rules and I don't know if it is a loophole which could be plugged.

It isn't something I am conversant with and I remind myself to avoid what is not within my circle of competence.

Of course, anyone who is comfortable with REITs managed by Keppel and are more in the know about REITs with a USA focus, just ignore crazy AK.

As for Neverwinter, it is in the D&D universe and the action combat is really fun.

When I searched for a F2P MMORPG more than 5 years ago, Neverwinter was the first one I saw and I have been at in since then.

In the last couple of years, I have tried a few other MMORPGs like Guild Wars 2 (GW2) and Black Desert Online (BDO).

I like BDO more than GW2 now probably because it is more similar to Nevewinter.

More recently, I started playing Star Wars: The Old Republic (SWTOR) and Final Fantasy 14 (FF14) but I won't blog about them because not many readers are interested in my blogs on MMORPGs. ;p

Also, I am still trying to get used to SWTOR and FF14 because they use tab targeting and are not action combat like NW, GW2 or BDO.

However, the story arcs in SWTOR and FF14 are very good. :)

Oh, I must not forget to say that all these games are F2P for me. ;p

Reference:
Dividends and retirement in 3 virtual worlds.

Cory said...

Everytime i see people lose money and then blame someone else, i shake head. No one owe them a living. Sooner the complainer realised that the better.

AK71 said...

Hi Cory,

Although there are people who would play the blame game, this reader who wrote to me didn't blame the blogger who said to buy Alibaba.

He says he followed the blogger willingly, after all.

The reader just wants my opinion on Alibaba as an investment and told me how he got into Alibaba in the first place.

As he doesn't want me to publish his comment for whatever reason, I suppose it could look like he is blaming the blogger based on what I have blogged here.

Anyway, the reader knows from reading this blog that he really shouldn't be depending on anyone's opinion when it comes to investments and that includes AK's opinion.

Sure, he can read blogs but using information available and doing his own due diligence is the best way forward. :)

We must always remember that people are not always altruistic. ;)

Reference:
Ignore the two Ms.

over herainbow said...

Hi Ak,
Given that SGX is generally a small market (670+ stocks) compared to other stock exchanges (3k and above stocks), would you be diversifying into other markets? Any thoughts to share? I personally find there aren't much opportunity in sgx esp when better stocks starts to get privatised over the years.

AK71 said...

Hi over herainbow,

I get asked this from time to time.

Why does AK invest only in entities listed in Singapore?

I did try investing in CLOB a long time ago and got clobbered.

So, it could be PTSD? ;p

On a serious note, if I had a lot more money than I have now to invest with, I might have to look elsewhere but, as it is, I have plenty to keep me busy with in Singapore. :)

I feel that if we have only a few million dollars of investible cash, Singapore probably has enough investment opportunities if we are investing for income and some growth.

References:
1. A wealth building strategy that has worked for AK.
2. Could we be financially free investing in Singapore only?

C said...

Dear AK Shifu

Good morning.

Could you please talk to yourself about the online brokers you use for buying stocks with money in SRS and CPF OA ? I am now using dbs vickers and limtan, but feel their commission is quite costly. I have read several web sites, but you know never ask a barber if you need a hair cut. : ) Pity you don't have email to ask this privately..

AK71 said...

Hi C,

I don't buy and sell stocks often.

When I do buy and sell, my orders are not usually tiny and the minimum brokerage fee per transaction doesn't impact me.

For someone who trades often or has frequent small orders, it probably makes sense to look for low cost brokers.

Which brokerages I use?

Clues:
1. Investing for income: An important element.
2. Star Wars (Spoiler Alert.)

DS said...

Hi AK!

Able to talk too yourself on the Daiwa House Logistics Trust IPO? Quite a fair few have said good things about it. Thanks! :)

Tea said...

Hi AK, sorry to side track, just wonder what is your views on upcoming Daiwa Logistic REIT. From below article, it seems ok in terms of sponsor, WALE and diversification strategy, though I would prefer more freehold and built-in rent escalation mechanism if possible. Are there any risks that would bother you if you were to invest in this REIT?

https://www.theedgesingapore.com/capital/reits/daiwa-house-logistics-trusts-manager-explains-higher-yield-and-asean-focus

Qiongster said...

Hi AK,

The impending IPO of Daiwa House Logistics Reit seems attractive in terms of risk-reward. Will you be able comment?

AK71 said...

Hi DS, Tea and Qiongster,

Just talking to myself:
Daiwa House Logistics Trust: Good or not?

Unknown said...

Hi Ak,

Thank you for sharing your thoughts on BABA.

A few comments to hopefully reach out to the investor who got spooked investing in BABA

1) Do not follow 'big names' investors blindly. Just because Temasek sold their BABA holdings doesnt mean you have to

2) BABA has a share buyback mandate. I am sure with their share price being bashed down like they are now, they would probably be conducting some backbacks.

3) Ant group which baba owns 1/3 is still growing and profitable despite all the bad media coverage

4) Baba is also trying to create their own chips to better serve the cloud computing space which is also growing

I am sure baba has a few positive things working in the favour, however, share price may not bounce up in the near term, so your investment horizon is key here.

Personally, i have a position in Baba (via hk mkt) and i believe in their growth trajectory.

Believe in your own investment thesis, manage your risks and ignore the market noise.

Lastly, temperament is utmost important in investing. If one cannot take the price gyration, then do consider investing in a passive index funds then to stock pick.

AK71 said...

Hi Unknown,

Thank you for sharing your thoughts.

All valid points.

Yes, don't simply ride on big names' coattails.

All of us have different realities and those big names could have bigger war chests and longer timelines than we do.

Even if we are very confident, don't bite off more than we can chew because things can go wrong and when they do go wrong, it might mess us up both financially and mentally.

Reference:
What to do as price plunged on $100K investment?

Open eye investor said...

Hi all,

I am just going to tell you the truth and facts. It will be painful.
Sorry for stakeholders in Alibaba.

Alibaba and all HKG/PRC stocks are all non-investible assets now.
Temasek usually take a long term investing approach. If they bail out, it is because something has changed in their investment thesis.

In Alibaba's case, it is PRC govt intervention and trade war with USA.
You just need to look at the Alibaba technical charts. My 11 year old son will tell you to get out asap and dont touch it anymore.

AK71 said...

Hi Open Eye Investor,

Many are hurting and I know some of these people.

Sometimes, we just have to cut our losses and move on.

Such is life.

It is also good to remind ourselves that it is actually illegal for foreigners to own certain businesses in China and Alibaba is one of them.

Variable Interest Entity (VIE) is a loophole that Alibaba used to list in the USA.

Anyone who invested in Alibaba through a VIE does not have an ownership stake at all in Alibaba but in a holding company.

Best of luck to those who are still holding on.

AK71 said...

Updated this blog on 3 Dec 21 with a new chart.

Alibaba stock price is trending ever lower.

The stock price is now 25% lower than it was when this blog was published.

The bearish trend is not only strong but very persistent.

Could be a long winter.

Capricon said...

AK
May be can share, in your opinion, what are the "tell-tale signs" that dust has settled and prices find a bottom?

Thanks.

AK71 said...

Hi Capricon,

This is where I point you to my past blogs. ;)

This is a good one to start with:
Investing with some common sense for peace of mind.

Then, read the blogs I have hyperlinked in it.

The most pertinent one would be the blog in which I talked to myself about buying DBS, UOB and OCBC during the most recent bear market.

I talked about the signs I looked for and they should be quite easy to spot.

Remember, technical analysis is about probability and not certainty.

Drawing imaginary lines thinking that we know the future direction of stock prices can be fun but it could also hurt and I see many people making this mistake.

Another blog which might be enlightening is this one:
Hock Lian Seng: Buying on weakness.

Remember that buying the dip is when we buy as prices decline to test supports in an uptrend.

When we buy in an obvious downtrend, we are not buying the dip because price is diving and not dipping.


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