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This morning, I sold half of my investment in Alibaba for a 51% capital gain.
It has been a long time since I last did any trading and this was a pretty nice one.
A 51% gain in less than 2 months was not something I was expecting.
However, this is what Mr. Market does.
We get surprises, pleasant ones and also nasty ones.
It is like opening a box of chocolates, someone said.
All we can do is to identify what we think are good entries and the rest is up to Mr. Market.
No one really knows what Mr. Market is going to do in the next few weeks, months or years.
I thought the downside was pretty limited.
I thought the numbers looked decent.
I got in when the chart said there was some long term support.
And I left the rest to Mr. Market.
If the price had gone lower, I had a plan as to where to buy more.
If the price should move higher, I had a plan on where to sell.
Alibaba wasn't a large investment for me and it has become a smaller investment now.
As it doesn't pay a meaningful dividend, the way to get more cash flow out of this is to trade.
This reminds me of the time when I was trading the Hang Seng Tech ETF and I think some of you might remember that.
So, what is my plan for Alibaba now?
My eventual target price for Alibaba is still HK$160 per share or so.
I talked about this before and in case you missed it, see:
Why sell now?
The rapid move higher in price does not seem sustainable to me and there is a chance we could see a pullback.
A pullback to HK$100 per share is possible.
A nice round number is an intuitive support level.
The SDR equivalent would be $3.40 per unit.
I could get in again then.
In case Mr. Market turns very pessimistic again, we could see price retracing all the way to the 200 days moving average once more.
This was at HK$80.00 but has moved higher and is now at HK$87.00 or so.
Naturally, with prices higher, this moving average is rising and we could see HK$90.00 soon.
That is just 10% lower than HK$100.
So, buying some at HK$100 looks OK to me and if price should sink another 10%, I might buy more as the uptrend would still be intact.
Anyway, just a short update.
If AK can do it, so can you!
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6 comments:
Hi Ak, took profit on baba and sitting on profit with wilmar
Hi SgFire,
Taking profit is never wrong. Gong Xi Gong Xi. :)
Hi AK, with ST Engineering up 48% YTD, will you consider taking profit or switching to others like the banks or REITs?
Currently at $6.91, its P/E ratio is 30.92 and 1-year forward dividend yield is at 2.60% ($0.18 annual dividend). In comparison, the three local banks offer a P/E ratio of between 10-11 and dividend yields of around 5%. Some REITs also offer an attractive dividend of 5-6% with P/E ratio of around 14-15.
While ST Engineering is expected to experience strong revenue and earnings growth over the next few years, it seems to be trading at a rich premium and seemed to have already priced in its higher future expected earnings, with the recent strong rally.
Additionally, given ST Engineering's relatively low dividend yield, it seems selling might the only way to realise profits in the form of capital appreciation instead of dividends.
Hi AK
I understand you are bullish on Wilmar given how undervalued it is. But I would like to know your thoughts on UMS. Technically, it’s overvalued in many ways and the payout ratio is a bit high as it’s quite cyclical. But don’t you think it’s worth a punt?
Hi AK
I understand you are bullish on Wilmar given how undervalued it is. But I would like to know your thoughts on UMS. Technically, it’s overvalued in many ways and the payout ratio is a bit high as it’s quite cyclical. But don’t you think it’s worth a punt?
Hi Ak,
I understand you are bullish on Wilmar given how undervalued it is. But shouldnt the low net margins worry you a bit? Also, would like to know your thoughts of UMS, I know the dividend payout is a bit high due to the cyclical structure of the tech industry. But wouldn’t it be worth a punt?
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