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!

Invest in Alibaba or Tesla?

Someone asked me recently would I consider investing in Alibaba or Tesla now that their stock prices are much lower.

Of course, for long time readers of my blog, it is probably easy to guess my answer. 

Singapore has sufficient opportunities for me and investing in Singapore suits my purpose.

I am also at an age where I am less interested in excitement and more interested in stability. 

Yes, AK is a young senior, as coined by PM Lee.

Still, from time to time, the mind forgets the body's age.

So, I bought into Hang Seng Tech ETF a few years ago and I blogged about it too. 

I was quite clear that I was trading the ETF since the ETF did not pay a dividend. 

After a few rounds of trading, my current smallish position is at such a low price that I am OK with holding on to it as a speculative position. 

Of course, by holding on to the ETF, I have an exposure to Alibaba too. 

To be quite honest, if I must choose, I would invest in Alibaba and not Tesla.

From a valuation perspective, well, conventional valuation perspective, Alibaba is fairly valued and some might even say it is undervalued.

It is pretty easy to make a case to invest in Alibaba now if not for policy risk in China.

As for Tesla, I blogged about it before a year ago when its stock price plunged 10% to $163 per share in a day.

At the time, Tesla was trading at a PE ratio of some 45x even after the price plunge.

To me, it wasn't mouth watering but it was eye watering.

I said back then that if Tesla was the growth company people said it was, then, perhaps a 45x PE ratio was acceptable.

However, at a PE ratio of 45x, Tesla would have to grow its earnings at 45% a year to have a PEG ratio of 1x which would make it fairly valued.

To be fair, looking at industry peers, a PEG ratio of 1.5x might be more reasonable which meant that Tesla should grow at 30% a year to make a PE ratio of 45x acceptable.

Was Tesla growing its earnings at 30% a year? No.

At the time, I said a more reasonable price for the stock would be around $80 a share.

With its stock price at $147 now which is much lower than where it was a year ago, Mr Market could be slowly waking up to the reality.

Alibaba might have to face policy risk but Tesla has personality risk amongst many other risks.

Personality risk?

The erratic and hubristic Elon Musk.

I remember someone asking him about BYD a few years ago in an interview and if he was concerned with the competition.

Elon sniggered and said, "Have you seen their cars?"

Well, see who is laughing now?

If AK can laugh to himself, so can you.

Related post:
Tesla's results and valuation.

Cut loss on Alibaba or buy more for a Merry Christmas?

I did not plan on blogging again until the new year when I would share my 4Q 2021 results.

I would also probably have blogs about the CPF sometime in January.

However, the reader who wrote to me about his purchase of Alibaba shares at $220 a share after reading blogs by a local blogger left me another comment.

For those who are clueless as to what I am talking about, read:

Invest in Alibaba Group? High risk, high reward?

Anyway, after reading the reader's latest comment, the blogging bug bit me and the result is this blog.

Alibaba's share price continues its slide and the downtrend is pretty much intact.

It should be obvious even to those who are not technically inclined that the downtrend is pretty persistent.

Many have been cut very badly by falling knives and some have had their fingers or hands cut off.

There are many who are still holding on in the hope of a reversal so that they could make a lot of money eventually.

However, they should bear in mind that there are many stale bulls who are waiting for a lift in prices so that they could sell to break even or to reduce their losses.

It is only reasonable to expect some strong resistance or those holding on could be setting themselves up for more disappointment.

So, investing in Alibaba Group now is to invest in a downtrend and to hope for a reversal that is likely to be full of obstacles.

It is definitely not for the faint hearted and those who do not have deep pockets.

This is especially the case when Alibaba does not pay dividends.

So, to say nothing of the capital loss, the opportunity cost for investing in Alibaba is pretty high.

Alibaba's investors are not being paid to wait for things to get better.

What to do?

If the ever widening paper loss is making us lose sleep, it is probably a good idea to reduce exposure.

Using money we cannot afford to lose or borrowing money to invest in such a situation is probably a sure way to get insomnia.

Those with anger management issues could even see familial and social ties affected.

What about those who have used money they can afford to lose?

Well, they are more fortunate because they only have to ask if they are willing to lose the money invested in the worst case scenario? 

Now, to answer the reader's question in his latest comment, whether to cut loss now or to hold on, is there another question he should ask?

Yes, there is one more.

If he did not invest in Alibaba Group at $220 a share so many months ago, would he invest in Alibaba Group at $117 a share today?

Why should he cut loss now if the answer is "yes?"

Of course, in such a case, it would mean that the time to cut loss has come and gone for him.

If he wouldn't invest in Alibaba Group even at $117 today, it probably means that his opinion of the investment has shifted so much that a much lower price is needed to entice him.

In such a case, cutting loss and buying again when a reversal is in place might be a better idea than simply holding on and possibly losing his mind.

We should bear in mind that share prices flow down a river of hope in a downtrend.

Low could go lower.

The time to buy is probably when share prices move lower in an uptrend (i.e. buying the dips) or even when share prices test supports in a rangebound situation.

Investing in Alibaba Group now is to buy the downtrend but if you are a billionaire like Charlie Munger or if you are investing with only a small fraction of the money you can afford to lose, you probably don't have much to worry about.

Having said this, we can never make all the money in the world and there are more important things in life than money.

Peace of mind is priceless.

I will end this blog with a screenshot of my house in Black Desert Online which has been nicely decorated for Christmas.

Merry Christmas!

Related post:
Investing with some common sense.

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

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: 

"Investing with some common sense for peace of mind."

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: 

"How to make recovering from investment losses easier?"

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: 

Noble Group will be worth $7.00 a share.

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.

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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:

1. To retire by 45, have a plan.

2. Investors eat crusty bread with ink slowly for peace of mind.
3. My investment portfolio or investment philosophy?