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!

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