Why We (and 4 Super-Investors) Love The Biggest Loser of 2021

Sirmium Capital CIO’s View of Alibaba

It's been an interesting few months for Alibaba, which has seen a decline of 47.12% over the last year. There is definitely more risk to factor in due to the Chinese crackdown/Evergrande situation, but overall we still believe the shares present an opportunity for capital appreciation as the firm has a strong balance sheet and is still experiencing massive growth.

We also believe China's goal is to become the largest global economic superpower, and they were just flexing their muscles with the recent crackdowns. As China's economy continues to expand, we believe Alibaba will be a direct beneficiary. Additionally, the recent buyback increase of 50% signals that management has tremendous confidence in their long-term business model.

Charlie Munger on Alibaba (Purchased over 600,000 shares of Alibaba in 2021)

In an interview last September, Charlie gave his opinion on whether China will allow businesses with strong leadership, like Alibaba, to flourish for decades to come?

I think the Chinese government will allow businesses to flourish. One of the most remarkable things in the history of the world is when China looked at the prosperity of places like Singapore and decided to copy what works and changed communism. China accepted Adam Smith and added it to their communism and now we have communism with Chinese characteristics.

This change created enormous growth in the average income of the average Chinese, lifting 800 million people out of poverty. They will continue to allow people to make money because they've learned it works. Deng Xiaoping, the former leader of the CCPPCC, said it best?“I don't care whether the cat is black and white as long as it catches mice that's my kind of talk”.

Charlie Munger then opined on whether the national government will interfere with Alibaba.

I consider that very unlikely. Jack Ma was very arrogant to be telling the chinese government how dumb they were and how stupid their policies were considering their system. China has behaved very shrewdly in managing their economy and have better results than the US in managing our economy. Their factories are just absolutely full of robots and are working beautifully. They are joining the modern world very rapidly and getting very skillful operating their system.

Mohnish Pabrai on Alibaba?(Purchased over 250,000 shares of Alibaba in 2021)

Alibaba has tailwinds that are even stronger than the large US tech sector. There are also serious barriers to entry due to their large market cap. I also think Alibaba is one of the cheapest players out there in the long term. They have a lot of potential with the cloud, which is non-existent from earnings perspective today.

Their cloud expenses are also misleading. BABA dumped their internal cloud cost in their financial statements. Therefore, I think they are making more than $15 billion because they are growing as well as investing in all the future growth."

Alibaba is the crown jewel of China and I don’t think the government is going to kill the golden goose.

Tweedy Brown on Alibaba (Purchased over 400,000 shares of Alibaba in 2021)

Alibaba is the largest e-commerce company in China with over 50% market share in terms of gross merchandise value and has several strategic investments, including a 33% stake in Ant Financial.

We are attracted to Alibaba because of its strong ecosystem, traffic and marketing efficiency. There are network effects associated with a very large user and merchant base.

Alibaba's core marketplace business is a strong cash generator. We believe it should continue to grow with the e-commerce sector, driven by a consumption upgrade in China and penetration into newer categories. The fine last year, equated to 4% of revenue and a minor portion of Alibaba's net cash.

Bill Miller on Alibaba (Purchased over 200,000 shares of Alibaba in 2021)

It would be surprising if Alibaba didn’t grow at least 15% per year. They generate a ton of cash and still have a dominate market position. Alibaba was growing 30% a year for a long time It will grow less in the future but that's now reflected in the in the price.

Since the financial crisis, people have been volatility and risk phobic and they see perceived risk they flee. The steep price decline from $300 a year ago to $120 reduces a lot of risk