Tag Archives: BABA

TRON Prices Surge 24% Ahead of Claim of Major Partnership Announcement

TRON prices surged 24% as the crypto coin’s founder, Justin Sun, proclaimed on Twitter Inc. (NYSE: TWTR) that a major partnership announcement is on the way.

Some investors are speculating that the partnership could be with Alibaba Group Holding Ltd. (NYSE: BABA), as Alibaba’s CEO Jack Ma was a mentor to Sun.

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Thanks to the surge in interest, TRON found its way into the top six cryptocurrencies by market capitalization today.

According to TRON’s website, the firm’s “protocol is the blockchain’s entertainment system of free content, in which TRX, TRON’s coin, is circulated. Its native economic system enables an unprecedented one-on-one interaction between providers of digital entertainment content and ordinary users.”

The website also said that “content providers will no longer need to pay high channel fees to centralized platforms like Google Play and Apple’s App Store.”

Below is a recap of the top cryptocurrency prices at 3:00 p.m. EST.

Bitcoin: $16,815.70, +9.60% Ripple: $3.08, -9.42% Ethereum: $1,007.02, +0.11% Bitcoin Cash: $2,554.21, +3.97% Cardano: $1.07, -6.97% TRON: $0.2296, +24.34%

Now that we know all of today’s price movements, here’s what has been moving these cryptocurrencies…

Cryptocurrency Markets Today

On Friday, the market capitalization of the global cryptocurrency sector hit $774.47 billion. Bitcoin represents 36.4% of the total market, a figure that is sharply down from previous months.

Top performers from the largest 50 cryptocurrencies by market capitalization included Bytecoin (up 82.16%), Dent (up 81.78%), Experience Points (up 68.47%), Binance Coin (up 48.77%), Ethos (up 43.23%), Dragonchain (up 25.34%), TRON (up 24.34%), and Siacoin (up 18.30%).

The worst performers from the top 50 largest cryptocurrencies by market capitalization included Golem (down -12.58%), Populous (down -12.26%), Steem (down -10.55%), IOTA (down -9.10%), NEO (down -8.49%), Ardor (down -8.37%), and Dash (down -7.48%).

Bitcoin Nears $17,000 After Strong Recovery

In a letter to investors this week, British investor Jeremy Grantham did not hold back his true feelings about the cryptocurrency.

He said that the size and speed of the Bitcoin price surge over the last year outpaces the bubbles of the South Sea Co. in 1720, Dutch “Tulip Mania” in 1637, and the Wall Street collapse of 1929.

Must Read: Bitcoin Futures Trading Will Send Prices to $50,000 in 2018

“Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble,” Grantham wrote.

Parody Coin Is Now Worth $1 Billion

It’s never a good sign when the creator of a cryptocurrency questions the valuation.

That has happened recently with the founders of Ethereum and Litecoin over the last few weeks.

So, imagine how the creator of a cryptocurrency that was created as a parody feels…

Let’s check in with Jackson Palmer, the founder of Dogecoin, a cryptocurrency that parodies a famous internet meme of a Shiba Inu dog.

On Thursday, the market cap topped $1 billion, and it’s entirely unclear what the purchase of the coin actually is.

“I have a lot of faith in the Dogecoin Core development team to keep the software stable and secure, but I think it says a lot about the state of the cryptocurrency space in general that a currency with a dog on it which hasn’t released a software update in over 2 years has a $1B+ market cap,” Palmer said in a conversation with CoinDesk.com.

Remember Your Cryptocurrency Gains at Tax Time

Did you make big gains from Bitcoin, Litecoin, and Ethereum in 2017?

If so, Coinbase is actively reminding its users to declare their profits come tax time this April.

The cryptocurrency exchange listed its advice to traders on the Coinbase homepage this week, including a working beta model to calculate gains for the year.

Coinbase uses a first-in, first-out (FIFO) accounting method to simplify tax calculations.

However, investors are encouraged to speak with their tax advisor to determine the best accounting method.

Up Next: Never Miss a Cryptocurrency Opportunity Again

Did you know we have a free research service that finds the most profitable opportunities in cryptocurrencies today?

It gives you real-time recommendations and price updates on only the best ways to make money now.

Here’s everything you need to know.

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Join the conversation. Click here to jump to comments…

SA Interview: Merger Arb Investing With Uncorrelated Returns

Uncorrelated Returns manages a global long/short equity hedge fund with particular focus on special situations. We emailed with Uncorrelated Returns about bitcoin, the AT&T (NYSE:T)/Time Warner (NYSE:TWX) deal and an emerging markets internet pair trade.

Seeking Alpha: You focus on special situations in your long/short fund – as special situations investing has been discussed a lot recently in the PRO Weekly Digest, what are examples of the special situations you focus on and more importantly how do you identify and evaluate them?

Uncorrelated Returns: I define special situations in my fund as stocks where mispricing exists because of a specific catalyst or company specific complexity. That means I look at things like merger arbitrage, spin-offs, post-merger integration plays and holding company arbitrage. My mandate is global, so I invest in situations in Europe and Asia as well as the U.S. Given the defined parameters of what Im looking for, I get a steady flow of new ideas from the sell-side, my Bloomberg terminal, Seeking Alpha and a variety of Google alerts.

For merger arbitrage, the potential upside is typically known, so Im evaluating primarily the likelihood of a deal closing, and the downside risk in the event it doesnt. For the former, my starting point is historical precedent, but that is augmented by research into the specific risks (e.g., regulators, CFIUS, shareholder votes) and an assessment of what the potential decision algorithm for each stakeholder is likely to be. Without trying to be overly specific, I try and translate this qualitative judgement into a quantitative probability of closure.

In determining the downside risk (and I follow a similar process with spin-offs etc.), Im really trying to answer the question of what the business is worth on a standalone basis. So I do as much reading as I can on each business to develop a mental model of the economics of the business, its competitive positioning and earnings power. Based on my expectation of earnings, I assign an appropriate valuation multiple to get to a target price. For shorter horizon trades, I tend to lean towards peer valuation multiples, while for longer horizons I might augment this with DCF-type models.

The market is generally pretty efficient, so Ill pull the trigger on an idea only when Im comfortable that there is sufficient reward on offer relative to the risk Im assuming.

SA: Prior to managing a hedge fund you were a highly rated sell-side analyst – how is the buy-side different than the sell-side? What were the best lessons you learned on the sell-side? What do you not miss about it?

UR: The core discipline of researching and valuing a business is the same. However, on the buy-side I have a much greater breadth of coverage (vs. a single sector to follow as an analyst), which by implication means that I cant have the depth of knowledge on every situation that I would have had on the sell-side. Possibly the biggest difference is the level of emotional investment required – as a fund manager I am living and breathing my portfolio constantly, and in my experience its a lot more difficult to switch off than when I was on the sell-side. The upside is I dont have to deal with some of the drudgery of working for a large bank, and dont have to spend as much of my day on the phone marketing my views. I miss writing though, so Seeking Alpha is a bit of an outlet for me!

SA: You made an excellent call on Brocade (NASDAQ:BRCD) – can you discuss your approach to merger arb? How do you narrow down the entire universe of pending deals to a smaller number that you look at more in-depth and finally to a few that you actually act on? How do you evaluate/reduce risk and size positions?

UR: I look at a global universe of announced mergers and acquisitions as my starting point, and quite simply prioritize my research according to the absolute and annualized return embedded in the spread (i.e. the difference between the market price and the transaction price). Typically I gravitate towards deals with double-digit annualized returns. Im happy to trade off duration for higher absolute returns, because the smaller the absolute return the more sensitive the trade is to execution risks.

For most of the deals Im invested in its pretty clear exactly what the key risk is – for instance, for Brocade it was obtaining CFIUS clearance. It would be na茂ve to think one could underwrite these risks with decimal point specificity, so one approach I often take is to back what the market is implying the probability of closure to be, and then subjectively test that for reasonableness. In the Brocade example, I estimated that the market was assigning less that a 2/3rds chance of the deal being completed, which intuitively felt too low to me given all the facts at hand.

Using my own estimates for downside risk and likelihood of deal completion, I calculate an expected value, or probability weighted price. If the expected value is sufficiently higher than the market price, Im happy to invest.

I size my positions using a proprietary formula that primarily uses the expected downside on a deal break to cap my potential loss per position but weighted for the likelihood of the deal closing.

SA: As a follow up, does the DoJ suit create an opportunity in the AT&T/Time Warner deal or is this a legitimate threat to it closing?

UR: It would be na茂ve to suggest a suit by the DoJ is not a material threat to any deal! Nevertheless, I like the risk/reward on TWX. At current levels there is about 18% upside if the deal closes, or 37% annualized if it closes in the middle of the year. The downside risk in my view is hardly overwhelming – TWX will likely earn around $6.50 in 2018; peers like DIS, FOX, CBS and CMCSA trade between 12x and 19x P/E multiples. While not a perfect comparison, putting TWX on a fairly conservative 13x multiple puts the break price at $85, around 6% lower than today. The market is therefore assigning a 1 in 4 chance of the deal completing. Despite its size and political angle, this is a vertical merger with no precedent for being blocked. Im not a lawyer, but my laymans view is that AT&T has a very strong case, and the likelihood of prevailing is significantly higher than 25%. I am long TWX.

SA: Can you walk us through your emerging markets internet pair trade involving Naspers (OTCPK:NPSNY) and Tencent (OTCPK:TCEHY) and how it could generate superior risk-adjusted returns?

UR: Naspers owns 33% of Tencent, the Chinese internet juggernaut. With the massive rally in large cap tech stocks this year, the Naspers share price has struggled to keep up with the gain in Tencent, and as a result trades at close to a 40% discount to the value of its Tencent stake. The rest of the business – a high-quality portfolio of media and internet assets that I believe are worth around $18bn – is valued at negative $40bn. Unlike Altabas (NASDAQ:AABA) holding of Alibaba (NYSE:BABA), there is no material tax leakage to consider for Naspers, so the discount is wildly excessive. The key driver for the discount is technical in nature – a combination of capital outflows from South Africa and significant index reweighting has weighed on Naspers relative to Tencent this year; looking ahead these technical flows should dissipate at a time when the stub assets start to deliver earnings growth ahead of Tencent. I believe this combination of factors should drive a relative rerating of Naspers over the next year. While Im a believer in Tencent, clearly its share performance is correlated with the FANG stocks, and hence the market; a pair trade is likely to be uncorrelated, and should the FANGs roll over, will likely do even better.

SA: What are your thoughts on Bitcoin, especially as now investors can trade futures (and more efficiently express a long or short view)?

UR: With the exception of illicit trade and circumventing foreign exchange controls in emerging markets, Bitcoin strikes me as a solution in search of a problem. The futures market may help dampen some of the volatility weve seen, but its early days. There are a lot of new buyers of Bitcoin purchasing purely on the fear of missing out. I have no view on when the bubble will burst or how high it will soar before it does, but certainly I see no fundamental reason to own any.

SA: Whats one of your highest conviction ideas right now?

UR: I still like Sky (OTCQX:SKYAY), the British satellite TV operator that is being bought by Fox. The stock has appreciated by 10% since I first wrote about it, but still offers a double-digit IRR. The deal is being reviewed by the Competition and Markets Authority in the UK to determine firstly whether Fox would be a fit and proper holder of a broadcast license, and secondly whether ownership limits in the news media would be compromised (given the Murdochs ownership of UK newspapers through News Corporation (NASDAQ:NWS) (NASDAQ:NWSA). On both of these points we remain confident that the deal will clear.

Whats changed since my article is Disneys announced acquisition of Fox. Foxs offer for Sky is unaffected, but should it fail (and Disney completes the Fox deal), a mandatory offer from Disney for Sky will be triggered. So either way, the deal gets done. While the CMA will review the current deal on its existing merits, having Disney in the background removes much of the political heat for the Culture Secretary, so reduces the likelihood of political interference in the process. So the original deal is still attractive, and the presence of Disney provides a credible backstop.

***

Thanks to Uncorrelated Returns for the interview. If you’d like to check out or follow their work, you can find the profile here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Check with individual articles or authors mentioned for their positions. Uncorrelated Returns is long Sky and TWX.

SeekingAlphaAbout this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, CATV Systems, Editors’ Picks, Interviews, United KingdomWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Why JD.Com Inc(ADR) Stock Is the Amazon of China

China-based JD.Com Inc(ADR) (NASDAQ:JD) often finds itself ignored in favor of its better-known competitor Alibaba Group Holding Ltd (NYSE:BABA). However, given the fact that JD holds its inventory, it appears to be more akin to Amazon.com, Inc. (NASDAQ:AMZN) than BABA. Most importantly, both the company and JD stock are on the rise.

And with JD’s rise, a competitive dynamic has arisen that will eclipse the battle between two well-known U.S. retail titans.

JD Stock Should Receive More Attention

My InvestorPlace colleague, Chris Lau, believes the time has come to shift attention from stories about Alibaba to JD.com news. I happen to agree with him. For one, Wall Street should regard JD, and not BABA, as the “Amazon of China.” JD owns its inventory and has built a warehouse and logistics infrastructure across China. Alibaba merely serves as a middleman.

Additionally, starting next year, consensus earnings-per-share (EPS) forecasts indicate a continuing streak of profitable quarters starting with the quarter ending in March 2018 for JD.com. While investors tend to buy a stock well ahead of this milestone, it serves as confirmation that the value proposition of JD stock remains viable.

JD Stock Has Risen More Slowly Despite Greater Company Growth

Other valuation metrics appear favorable for JD as well. The current forward price-to-earnings (PE) ratio of JD stock is higher than Alibaba (47 vs. 26). Still, JD stock trades at just over 1 times sales and about 7 1/2 times its book value. Alibaba’s trades at over 9 times book value, and its price-to-sales ratio stands at 15!

The JD stock price has increased about 65% year to date, but BABA stock has more than doubled. While both appear more favorable to Amazon’s 300 P/E ratio, JD.com stock has a much more favorable P/S ratio, along with the built-in stability of owning a logistics infrastructure and higher revenue growth. And with JD’s much lower market cap ($61 billion vs. almost $440 billion for BABA), JD stock has more room to grow.

JD partially compensates for its smaller size by forging strategic alliances. One recent bit of JD.com news involves a partnership with Chinese investment company Tencent Holdings Ltd (OTCMKTS:TCEHY). JD and Tencent together have taken a position in Chinese online clothing retailer Vipshop Holdings Ltd – ADR (NYSE:VIPS). Though Vipshop remains a competitor, a position in the company helps JD better compete with the much larger Alibaba.

JD Stock Will Profit From a Larger Middle Class

Most importantly, the story of the emerging middle class in China continues. Most of the population has moved out of poverty. However, large segments of the population will be moving from a lower- to an upper-middle-class status. The upper-middle class (defined by McKinsey and Company as $16,000-$34,000 per year in income) will grow from 14% of the population in 2012 to 54% in 2022. The cohort of lower-income Chinese (those with incomes of less than $9,000 per year) will fall from 29% to 16% in the same period. Given that China’s population is almost five times that of the United States, the cohort moving from lower-middle to upper-middle class represents nearly twice the U.S. population.

Both Alibaba and JD.com have benefitted and continue to benefit from these upward shifts in income. However, with the size advantage enjoyed by China, the battle between JD and BABA will be the Chinese equivalent of the battle between Wal-Mart Stores Inc (NYSE:WMT) and Target Corporation (NYSE:TGT).

Like Walmart in comparison to Target, Alibaba enjoys a tremendous size advantage over JD. Still, these companies have spent decades trading places in the U.S. retail environment. Often when WMT is up, TGT is down and vice versa. The same pattern appears to be forming for JD and BABA. BABA currently holds the higher position. However, JD’s move to profitability sets up JD to attain an advantage in stock growth and reputation.

Final Thoughts on JD Stock

Expect the battle between BABA stock and JD stock to grow into a larger, online version of the competitive battle between Walmart and Target. A move into profitability and a deeper infrastructure serve as enough reason to take JD seriously. Its Amazon-like structure positions JD to take on and succeed against the much larger Alibaba.

Moreover, China’s income growth, as well as the vast size difference between JD.com and BABA create substantial room for JD to grow.

Also, JD’s move into profitability catalyzes a move upward relative to Alibaba. Given all this, investors in the Chinese online retail world should sell BABA and buy JD stock.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.

 

 

 

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3 Big Stock Charts for Thursday: Alibaba Group Holding Ltd, Intel Corporation and Boeing Co

The bulls and bears continue to pull the market in varying directions as we head into year-end trading. While the bears appear to have a grip on the technology sector, the bulls continue to push industrial stocks higher.

Today’s three big stock charts look at the numbers and indicators for Alibaba Group Holding Ltd (NYSE:BABA), Intel Corporation (NASDAQ:INTC) and Boeing Co (NYSE:BA) as three stocks that represent this bull/bear tug-of-war.

Alibaba Group Holding Ltd (BABA)

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Alibaba has spent much of the last month breaking its trend into a bearish pattern as BABA stock is lacking in technical strength and breadth. Now, shares are sitting at a key price test again, which will determine the next 5-10% move over the next three weeks.

Once again, Alibaba shares find themselves at the $170-level, which has served as round-numbered chart support for BABA stock. The last test of this mark resulted in a short-term rally that has since reversed on heavier selling volume. This time around, there is more concern over $170 holding as BABA stock’s RSI was indicating an oversold condition during the last test of this critical price point. The resulting “dead cat bounce” resulted in a lower high, indicating a strengthening bearish trend with lower highs and lower lows. Alibaba stock’s 50-day moving average is now rolling over, indicating that the intermediate-term outlook for BABA stock is turning negative. Traders will begin selling into the strengthening negative momentum on the stock pushing shares even lower. Intel Corporation (INTC)

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Intel, along with many of the semiconductor stocks, has been exposed to selling pressure as technical traders have been migrating to the industrial stocks from high-flying tech issues in the fourth quarter.  As we’ve mentioned, this follows a seasonal trend so its not unexpected to see INTC slumping.

That said, the chip giant is sitting at a critical technical test that will likely set the course for January’s trading.

For the first time since August, shares of Intel are testing their 50-day moving average as the stock has endured seasonal selling. A break below $43 will trigger a technical selling signal as INTC stock breaks below its 50-day. Momentum has turned negative on Intel shares, resulting in the Chande Trend Meter to slip into neutral territory. This indicates that INTC stock is likely to trade sideways with a negative bias through the end of the year. As we’ve pointed out, the tech sector tends to see strong seasonality in January. In Intel’s case, the stock posts positive returns in January 55% of the time over the last 20 years. A break below the 50-day will reduce the probability that INTC will rally in January along with the rest of the tech sector. Boeing Co (BA)

Boeing Co (BA)investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-300×227.png 300w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-40×30.png 40w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-200×151.png 200w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-396×300.png 396w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-116×88.png 116w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-100×76.png 100w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-165×125.png 165w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-66×50.png 66w,https://investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-78×59.png 78w, investorplace.com/wp-content/uploads/2017/12/171214-BA-Daily-158×120.png 158w” sizes=”(max-width: 700px) 100vw, 700px” />

Industrial stocks have been booming lately as all indications of the economy’s strength are pointing to continued growth and strength. BA shares have gone parabolic lately as the Boeing’s vision for the future has combined with some strong technical indications.

The charts answer whether its time to buy or sell BA stock as it soars higher.

Boeing shares are trading 10% higher in December. The rally has resulted in an overbought signal from the stock’s RSI, but there are other momentum indicators that continue to suggest that BA is a “buy,” even at this price. The Chande Trend Meter continues to flash buy signals as readings of the momentum/stochastic indicator are forecasting even higher prices for Boeing. BA shares are still riding a volatility rally as the stock remains above its top Bollinger Bands. This activity, along with a relatively low volatility level for the rally, maintain that Boeing stock’s outlook includes prices that are likely to move above $300 within the next week. Given the technical strength and momentum, traders will take any opportunity that BA stock provides to buy at lower prices as a “buy the dip” situation. Watch for fast support to kick-in on Boeing shares on any dip of more than 3%.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

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George Soros 7 Best Stock Picks of 2017

Sometimes identifying the best stocks to buy can be difficult, but you could do a lot worse than check out the stocks selected by one of the world’s wealthiest hedge fund managers — George Soros.

Self-made Soros fled Hungary and funded his way through an economics degree by working as a railway porter and waiter. Years of successful investing gave him a net worth of $25.2 billion and the no. 1 ranking on Forbes’ hedge fund manager rich list. (Warren Buffett, who has a whopping $75 billion net worth, wins the no.1 title for the wider finance and investments community). In 1992, Soros shorted the British pound and reportedly made a profit of $1 billion. He became known as the man who broke the Bank of England.

Now we can track the latest trades of his family office, Soros Fund Management. Just-released SEC forms reveal a valuable glimpse into which stocks Soros likes, and which he doesn’t. I looked back over 2017 and pinpointed Soros’ best stock picks this year. These are the stocks that this legendary hedge fund manager is most bullish on. Note that Soros has just shifted an incredible $18 billion from the fund to charity. Following the move, the fund manages about $4 billion in portfolio assets.

Here I also include TipRanks’ stock insights from Wall Street’s best-performing analysts. Does the Street sentiment match Soros’ stocks to buy — or is Soros going rogue with his stock picks? We can check the overall analyst consensus as well as the average target price. This indicates how far the stock can spike over the coming months.

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring” says Soros. With this sobering thought in mind, let’s dig down into Soros’ top seven stock picks of 2017: George Soros Stocks to Buy: Altaba (AABA) investorplace.com/wp-content/uploads/2017/05/techmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/05/techmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/05/techmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/05/techmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/05/techmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/05/techmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/05/techmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/05/techmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/05/techmsn-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/05/techmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Investment company Altaba Inc (NASDAQ:AABA) is seen by many as a cheap play on Chinese e-commerce giant Alibaba Group Holding Limited (NYSE:BABA). Since initiating the position in Q217, Soros has built up a position of 2.8 million shares valued at $185.7 million. This makes AABA the fourth-largest stock in the fund’s portfolio.

AABA, formerly Yahoo!, has a 15% stake in Alibaba which is now worth a massive $65 billion. AABA is up 81% year-to-date largely due to its valuable BABA stake. Nonetheless, the stock still trades at a big discount to the sum of its assets. It is likely that at some point the company will wind down and distribute its value to shareholders.

In the meantime, however, five-star Oppenheimer analyst Jason Helfstein is bullish on AABA’s outlook. He says shares are undervalued and reiterated his buy rating on Nov. 7. “We are raising our AABA target to $99 from $75, following a more bullish outlook for BABA shares. BABA reported strong F2Q results, with the Ant Financial SME loan business growing ~400% y/y. As a result, we increased our BABA target price to $220.” Other elements supporting AABA include: the market value of Yahoo Japan shares ($9 billion) as well as its cash & marketable debt securities portfolio.

Overall the stock has a relatively positive Moderate Buy analyst consensus rating on TipRanks. The average analyst price target of $85 indicates 23% upside from the current share price.

George Soros Stocks to Buy: SolarEdge Technologies (SEDG) George Soros Stocks to Buy: SolarEdge Technologies (SEDG)investorplace.com/wp-content/uploads/2017/03/solarmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/03/solarmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/03/solarmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/03/solarmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/03/solarmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/03/solarmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/03/solarmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/03/solarmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/03/solarmsn-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2017/03/solarmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Soros has just initiated a new position in solar energy leader SolarEdge Technologies Inc (NASDAQ:SEDG). He snapped up 695,305 SEDG shares worth close to $20 million in Q3. The company has just delivered very impressive third quarter earnings results with “near flawless” execution. For the quarter, SEDG reported revenue of $166.5M, easily beating guidance of $155M to $165M.

“We’re staying buyers as this innovator is delivering what growth investors want — big revenue and margin upsides/guides (with the added benefit of solid cash flow)” comments top Canaccord Genuity analyst John Quealy. He has a buy rating and $40 price target on the stock.

“While the broader solar market is experiencing the typical boom/bust dynamics that many other industrial growth sectors have, SolarEdge’s differentiated power conversion and control offerings offer a clearer path toward secular profit improvement, in our view” says Quealy. However he adds that “shares will still likely exhibit volatility given the dependence on solar, risks around increased competition, and pricing pressures.” A key date to look out for is President Trump’s final import tariff decision expected on January 12/13.

Overall, this “Strong Buy” stock has received seven buy ratings in the last three months and just one hold rating. (Note however that if we look at only top analysts the stock has 100% buy ratings.) Meanwhile the average analyst price target stands at close to 10% upside from the current share price.

George Soros Stocks to Buy: InterXion (INXN) George Soros Stocks to Buy:  InterXion (INXN)investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-100×55.jpg 100w,https://investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2017/05/cloud-storage-msn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Throughout 2017, Soros has been ratcheting up his stake in data storage pioneer InterXion Holding NV (NYSE:INXN). Now Soros holds 400,000 INXN shares worth almost $20.4 million. Luckily for Soros, INXN has just delivered very strong earnings results for the third quarter. Five-star Oppenheimer analyst Timothy Horan also ramped up his INXN price target from $55 to $62 last month.

“INXN reported strong growth helped by an improved European economy, strong cloud growth and charging for cross-connects” says Horan. He believes that “Europe is in the early stages of cloud adoption; we see a long runway for growth.” Meanwhile demand dynamics remain favorable in key markets with INXN pricing its services below demand to expand its interconnectivity-focused datacenters.

We can see from TipRanks that this “Strong Buy” stock boasts an impressive six back-to-back buy ratings from analysts over the last three months. These analysts believe (on average) that INXN will spike 10% to hit $62 over the coming months.

George Soros Stocks to Buy: Kraft Heinz (KHC) George Soros Stocks to Buy:  Kraft Heinz (KHC)investorplace.com/wp-content/uploads/2016/10/khcmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/10/khcmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/10/khcmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/10/khcmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/10/khcmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/10/khcmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/10/khcmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/10/khcmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/10/khcmsn-170×93.jpg 170w” sizes=”(max-width: 728px)100vw, 728px” />Source: Mike Mozart via Flickr

The Kraft Heinz Company (NASDAQ:KHC) is one of the big stock picks from Soros this year. He poured money into the food and drink powerhouse in Q1, Q2 and Q3. Indeed, in the last quarter Soros boosted the fund’s Kraft position by 48% with the purchase of 299,587 shares. Following this move Soros now has a $53.1 million position in the stock.

And Soros isn’t the only fund guru betting on KHC. Perhaps he was inspired by Warren Buffett, aka the Oracle of Omaha, who has a huge KHC position of $25.5 billion. In fact, Kraft Heinz is Berkshire Hathaway Inc.’s (NYSE:BRK.A, NYSE:BRK.B) second biggest position after Wells Fargo & Company (NYSE:WFC).

From the Street side, David Palmer is a five-star RBC Capital analyst with a bullish $94 price target on the stock. He says 2018 may be a year of accelerating top and bottom line growth for KHC, boosted by the full-year benefits of 2H17 supply chain investments. The company is also looking to repatriate key brands like Ketchup in Europe and Australia to scale up ex-U.S. growth.

Overall, KHC has a cautiously optimistic “Moderate Buy” rating from the Street. In the last three months this breaks down into five buy and three hold ratings. The $88 average analyst price target indicates 13% upside potential from the current share price.

George Soros Stocks to Buy: EQT Corporation (EQT) George Soros Stocks to Buy:  EQT Corporation (EQT)investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-78×43.jpg 78w,https://investorplace.com/wp-content/uploads/2016/06/pipelinemsn-1-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Maciek Lulko (Modified)

Soros revealed a very bullish sentiment on natural gas producer EQT Corporation (NYSE:EQT) over just two quarters. In Q217 he initiated a $38 million position — and then quickly snapped up a further 609,165 shares in Q3. After this 93% boost, Soros now holds $82.5 million shares of EQT. As a result, the stock is now no. 11 in the fund’s portfolio.

On Nov. 13, EQT completed its takeover of Rice Energy for roughly $8.2 billion. “With the closing of the transaction, we are combining two of the leading operators in the Appalachian Basin to create an even stronger company that is positioned to deliver greater returns to shareholders through operating efficiencies and improved overall well economics,” commented Steve Schlotterbeck, EQT’s CEP. The deal should make EQT the largest producer of natural gas in the U.S. — and could create synergies of up to $2.5 billion.

This “Strong Buy” stock has an encouraging outlook from the Street. Five analysts have published buy ratings on EQT in the last three months, versus just one hold rating. These analysts are predicting (on average) a spike of 35% from the current $57 share price over the next 12 months.

George Soros Stocks to Buy: Comcast (CMCSA) cmcsa stock comcast stockinvestorplace.com/wp-content/uploads/2016/09/cmcsamsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/09/cmcsamsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw,728px” />Source: Mike Mozart via Flickr

Last quarter, Soros made a new play for mass media corporation Comcast Corporation (NASDAQ:CMCSA). He initiated a serious position in the stock of 1 million shares worth $41.7 million. And the 100% bullish outlook from the Street is also an encouraging sign for investors. In the last three months eight analysts have published buy ratings on CMCSA. Meanwhile the $44 average analyst price target indicates that the stock can rise over 16%.

Top Pivotal Research analyst Jeffrey Wlodarczak is even more confident on CMCSA than the average analyst. He sees $50 as a price target — which suggests sweet upside potential of 30%. According to Wlodarczak $35 is as low as CMCSA can go (it is currently at $38) but investors will need to be patient as Comcast ‘proves the sky is not falling out.’

The stock is cheap right now because CMCSA is currently transitioning from a focus on video/data/phone revenue to customer growth driven by high margin data. “Investors historically don’t like transitions which is partly why the cable names and Comcast have underperformed, however we believe the current Comcast valuation (7.3X 2018 EBITDA) is so low (and the risk/reward so high) that the shares are quite compelling” says Wlodarczak. He is now looking for solid financial guidance for 2018 — boosted by increasing data speeds and share taking.

George Soros Stocks to Buy: Monsanto (MON) investorplace.com/wp-content/uploads/2017/02/monmsn-300×165.jpg 300w, investorplace.com/wp-content/uploads/2017/02/monmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2017/02/monmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2017/02/monmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2017/02/monmsn-400×220.jpg 400w, investorplace.com/wp-content/uploads/2017/02/monmsn-116×64.jpg 116w, investorplace.com/wp-content/uploads/2017/02/monmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2017/02/monmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2017/02/monmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2017/02/monmsn-170×93.jpg 170w” sizes=”(max-width: 728px) 100vw, 728px” />Source: Shutterstock

Last but not least we have biotech giant Monsanto Company (NYSE:MON) — one of the world’s top suppliers of farm pesticides and seeds. Throughout 2017, Soros made a number of bullish MON trades. Starting in Q1 he initiated a position — which he then increased in both Q2 and Q3. Now the fund holds 188,539 MON shares worth close to $22.6 million.

German drugs and pesticide group Bayer AG (ADR) (OTCMKTS:BAYRY) is planning a massive $66 billion takeover of Monsanto. The deal was supposed to go through in 2017, but it has been delayed by an antitrust review from the European Commission (EC). The EC will now deliver its verdict in January 2018.

However, Reuters is already reporting that EU regulators are about to warn Bayer that its proposed takeover may hurt competition. According to sources, the EU now has a charge sheet of objections to the deal — although a final decision has not yet been made. As a result Bayer could be forced to make further concessions for the deal to go through.

The Street has a more divided take on Monsanto. With a “Moderate Buy” analyst consensus rating, analysts are predicting 8% upside from the current share price.

Which stocks are top 25 hedge fund managers buying? Find out here.

TipRanks doesn’t just rank hedge fund managers. We also give investors the latest insight into the activity of 4,500 analysts, 5,000 financial bloggers and even 37,000 corporate insiders.

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Costco – Why The Market Might Be Right

I think we can all agree the market can at times be, shall we say myopic? But in the long run, the market has a great way of separating the winners from the losers. It is the summation of all thoughts, fears, demand, supply, and even a bit of greed. The market is the consummate weighing machine of not the past, but the prospects of a company.

So, when I see Costco (NASDAQ: COST) trading at all-time highs, with a large expansion in its market multiple its easy to dismiss this as Ahh the market is overvaluing this company and to be skeptical. I was cautious on the stock at $158. But it is more prudent to try to understand just why the market seems so in love with Costco lately and why I had it so wrong.

Chart
COST data by YCharts

Nice chart lately. You can see the noise effects of Amazons (NASDAQ: AMZN) foray into Whole Foods. The pros/cons of that purchase have been repeatedly covered here on Seeking Alpha. A 2nd chart below, with a more expanded time frame, shows Costcos Trailing Twelve Month (TTM) P/E Ratio. Note, the stock is not that far above its historical average P/E multiple.

Chart
COST data by YCharts

The value folks are screaming Sell! and the long-term holders are simply saying Yawn. If the short argument is that the stock is overvalued that is a bit of a stretch, but you could make that case. But how overvalued? 20-30 points or so? Not a compelling risk-reward. Shorting stocks on valuation is almost always the wrong approach.

Sometimes its just as simple as this, the best stocks always seem overvalued. But in Costcos case, Im going to outline 4 reasons why the market might have this one right. I progress from the rather obvious point 1 to the bit more obscure point 4.

Point 1 – Solid management and a long-term, laser-like focus on its customers and needs.

No new revelations here, but Costcos management is well regarded. Employees are treated rather well for a retailer. 88% of Costco Employees have company-sponsored healthcare. Coincidentally, 88% of Costco employees think they are Fairly Paid. A loyal workforce and low turnover have always been a Costco staple. Not an earth-shattering observation I know, but still refreshing to see.

Point 2 The membership program, and the effect on gross margins.

Of course, we all know that Costco has a membership fee. This allows the company to sell products at a razor-thin margin. The company’s yearly gross margins, dating back to 2008, can be seen here. Lately, margins have been about 13.3%. Yes, that includes its membership fees. But the world is changing. Here is where Amazon might have helped Costco. It is now very well engrained into the customer’s behavior to pay membership fees. There is always the bull/bear argument on whether or not Costcos fees are sustainable. I would bet they are. It is not a “one or the other” type of arrangement for customers. You can have an Amazon Prime membership and a Costco membership. The disloyalty police do not come knocking on your door. I would like to know the statistics on how many customers have both. I think the results would be surprising. For now, that will have to be a number we can only guess at, as I dont see Amazon and Costco working together to reveal that information.

But at Costco, it seems you really do get something for your membership. Here is where Costco shines. By only having a limited inventory and limited SKU selection it can really drive value on its customers’ needs. Here is a quote right from its corporate web page

Commitment to quality. Costco warehouses carry about 4,000 SKUs (stock keeping units) compared to the 30,000 found at most supermarkets. By carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members.

So, lets take a real-world example. While researching this piece, I took an item from Costco and compared it directly to the same item on Amazon. I was more than a little surprised by the price disparity.

Louisiana Champion Pellet Grill & Smoker

At Amazon, this Louisiana Grills Champion Pellet Grill retails for $1533 + $230.49 shipping. The same exact item at Costco is listed at $1,199.99 with Shipping & Handling included. Thats pretty big savings! Seems a popular item as when I checked back, it now says Out Of Stock on Costcos site. Looking at the comments section on Amazon, some noted the item on Costcos site as listing at $999 at one point.

In general, I would say nearly any item you find at Costco will be of value. When Costco only marks the product up 15-17%, It would be difficult for any other retailers to match.

With more and more people accepting the concept of membership fees (thank you, Amazon), I dont think the bears’ argument that people will stop paying is rational.

Point 3 Lets talk about quality

In the new world of retail, where nearly anything can be bought online, how do you control the quality? With everyone and their brother setting up Shopify (NYSE:SHOP) stores and selling direct from Aliexpress and Alibaba (NYSE:BABA), whos keeping an eye on the quality?

I recently served as COO for a large manufacturing company here in Cebu, the Philippines. Costco was one of our newer customers. The level of quality control it required of us was incredibly detailed. The weight (of a hand cast, stone cast item) had to be in a range of 0% to +5% of list. Most of our customers give us a 20% leeway. Our first samples went to a testing lab where it conducted 47 pages of tests on the product. These included special designed weight tests (It was a Garden stepping stone item) with various forces applied for various times from different angles. Sun exposure tests, chemical tests, every paint was tested for lead. It performed acid tests on durability, finish strengths, color, nearly everything and more, that one could think of. Before final shipment, Bureau Veritas, a highly regarded 3rd party testing agency, sent three people who tested our final products for two days straight. Costcos testing requirements are much more rigorous than what we observed for other mass market retailers.

Because Costco has such a narrow SKU focus, it can really attend to the marketability, quality, price, and function of its products. I came away from that experience thinking to myself I feel pretty good about anything I buy at Costco.

Amazon does not have this luxury. The company cannot possibly perform this level of detailed quality control on its items.

Costco 4000 SKUs.

As of January 2017, Amazon had 372.5 million SKUs.

This gives Costco an enduring and competitive advantage on quality.

Point 4 Here is where I think the market really has Costco right. Retail 3.0

Yes, it seems an expensive stock. Yes, it has run straight up lately. But lets think about how retail has changed. Uh oh, did he just say, This time is different? Yes, I did! This time it is different and thats what the stock chart has been telling us.

Lets explore what has changed.

Retail 1.0 First we had the good old-fashioned stores. They put up a physical presence in an area, sold their wares, tried to get more traffic and expand locations. They traded at conventional market multiples of, lets just say, X times earnings/cash flows etc. Fine

Retail 2.0 Then of course came the internet. No longer should we be burdened by the overhead of those pesky, out-of-date, Brick & Mortar retailers. Everything was going to go online. Every B&M was going to be put out of business. As trust grew with online purchases, the market potential (and some market caps) began to soar.

But what multiple should Retail 2.0 trade at? Still a work in progress on figuring that out, but the market has come a long way in the last 20 years on this topic. At least we arent referencing internet stocks like the old days as a multiple on eyeballs and page views. Matter of fact, we really dont even call them internet stocks anymore.

But doesnt it make sense that a company with less physical assets and without the burden of rents/employees/overhead should trade at a larger multiple maybe 2x or 3x. I dont really know the answer to that question, but I do know the answer to the next point.

Retail 3.0 Somewhere along the way of all B&M going out of business, a funny thing happened it didnt. Suddenly, many of the traditional B&Ms learned how to compete online. Home Depot (NYSE: HD) is one of the greatest examples. Just considering its e-commerce sales, Home Depot is the #7 largest internet retailer!

Suddenly having physical locations across the country is no longer a liability. It is a real asset. Costco can out Amazon (its a verb), Amazon. It has many ways to leverage its physical assets.

BOPIS Buy Online, Pickup in Store today BOSS Buy Online, Ship to Store BORIS Buy Online, Return to Store BODFS Buy Online, Deliver from Store

As Amazon tries to build out a physical footprint, Costco is already there. You could even say that Amazons purchase of Whole Foods was a complete validation of the Retail 3.0 concept. Amazon recognized its weakness and is moving to correct it. The market is finally beginning to validate the physical presence of companies who also sell online. Retail 3.0 is the integration of B&Ms into an online world.

Shouldnt companies, with these new revenue levers, simply trade at higher multiples than the Five & Dimes of the past? Can you really value these stocks in the same manner as before?

So how about the stock?

I understand Im taking a big risk here. Ive gone full heretical. This is exactly what a top-tick article looks like. But I will be buying my first purchase of Costco stock this week. Would I love to wait for a pull-back? Sure, but not even a Genie can tell you when and how that will happen. Ill build a small and growing position. It really wont matter that much whether I bought at 180 or 190 when the stock reaches 500. How long will that take? Probably more than a few years, but I can be patient. Sometimes you have to leave the meat in the smoker for good long while.

Why not buy your full position now then? Well, I still think Costco will have some margin pressure (due to packaging article in link) in the next 6-12 months. Not sure how much that will be. If it takes the stock down some, Id like to have room to buy more. Plus, as I rotate out of other stocks, Ill have more available capital to put to work in Costco. This isnt a short-term trade for me. If my theory is correct, that Costco will begin to be more appreciated by the market for its retail 3.0 progress, my holding period will be measured in years. If Im wrong, and the world hasnt changed, well there is that nice dividend still right?

As always, best of luck to all. I’ll continue to update the Asia packaging problems in my blog as I have new information.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in COST over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Largest holdings are HOME, BP, NEWR. I will be purchasing COST this week.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, Discount, Variety StoresWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

3 Big Stock Charts for Thursday: Alibaba Group Holding Ltd, Intel Corporation and Boeing Co

The bulls and bears continue to pull the market in varying directions as we head into year-end trading. While the bears appear to have a grip on the technology sector, the bulls continue to push industrial stocks higher.

Today’s three big stock charts look at the numbers and indicators for Alibaba Group Holding Ltd (NYSE:BABA), Intel Corporation (NASDAQ:INTC) and Boeing Co (NYSE:BA) as three stocks that represent this bull/bear tug-of-war.

Alibaba Group Holding Ltd (BABA)

Alibaba Group Holding Ltd (BABA)investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-300×227.png 300w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-40×30.png 40w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-200×151.png 200w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-396×300.png 396w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-116×88.png 116w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-100×76.png 100w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-165×125.png 165w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-66×50.png 66w,https://investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-78×59.png 78w, investorplace.com/wp-content/uploads/2017/12/171214-BABA-Daily-158×120.png 158w” sizes=”(max-width: 700px) 100vw, 700px” />

Alibaba has spent much of the last month breaking its trend into a bearish pattern as BABA stock is lacking in technical strength and breadth. Now, shares are sitting at a key price test again, which will determine the next 5-10% move over the next three weeks.

Once again, Alibaba shares find themselves at the $170-level, which has served as round-numbered chart support for BABA stock. The last test of this mark resulted in a short-term rally that has since reversed on heavier selling volume. This time around, there is more concern over $170 holding as BABA stock’s RSI was indicating an oversold condition during the last test of this critical price point. The resulting “dead cat bounce” resulted in a lower high, indicating a strengthening bearish trend with lower highs and lower lows. Alibaba stock’s 50-day moving average is now rolling over, indicating that the intermediate-term outlook for BABA stock is turning negative. Traders will begin selling into the strengthening negative momentum on the stock pushing shares even lower. Intel Corporation (INTC)

Intel Corporation (INTC)investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-300×227.png 300w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-40×30.png 40w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-200×151.png 200w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-396×300.png 396w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-116×88.png 116w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-100×76.png 100w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-165×125.png 165w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-66×50.png 66w,https://investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-78×59.png 78w, investorplace.com/wp-content/uploads/2017/12/171214-INTC-Daily-158×120.png 158w” sizes=”(max-width: 700px) 100vw, 700px” />

Intel, along with many of the semiconductor stocks, has been exposed to selling pressure as technical traders have been migrating to the industrial stocks from high-flying tech issues in the fourth quarter.  As we’ve mentioned, this follows a seasonal trend so its not unexpected to see INTC slumping.

That said, the chip giant is sitting at a critical technical test that will likely set the course for January’s trading.

For the first time since August, shares of Intel are testing their 50-day moving average as the stock has endured seasonal selling. A break below $43 will trigger a technical selling signal as INTC stock breaks below its 50-day. Momentum has turned negative on Intel shares, resulting in the Chande Trend Meter to slip into neutral territory. This indicates that INTC stock is likely to trade sideways with a negative bias through the end of the year. As we’ve pointed out, the tech sector tends to see strong seasonality in January. In Intel’s case, the stock posts positive returns in January 55% of the time over the last 20 years. A break below the 50-day will reduce the probability that INTC will rally in January along with the rest of the tech sector. Boeing Co (BA)

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Industrial stocks have been booming lately as all indications of the economy’s strength are pointing to continued growth and strength. BA shares have gone parabolic lately as the Boeing’s vision for the future has combined with some strong technical indications.

The charts answer whether its time to buy or sell BA stock as it soars higher.

Boeing shares are trading 10% higher in December. The rally has resulted in an overbought signal from the stock’s RSI, but there are other momentum indicators that continue to suggest that BA is a “buy,” even at this price. The Chande Trend Meter continues to flash buy signals as readings of the momentum/stochastic indicator are forecasting even higher prices for Boeing. BA shares are still riding a volatility rally as the stock remains above its top Bollinger Bands. This activity, along with a relatively low volatility level for the rally, maintain that Boeing stock’s outlook includes prices that are likely to move above $300 within the next week. Given the technical strength and momentum, traders will take any opportunity that BA stock provides to buy at lower prices as a “buy the dip” situation. Watch for fast support to kick-in on Boeing shares on any dip of more than 3%.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.

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Sea: Not The Quarter We Were Looking For

I’ve never understood why any investors were particularly excited about the Sea (NYSE: SE) IPO, the Singapore-based internet platform that operates a digital gaming platform and distributes League of Legends in Southeast Asia (its biggest source of revenues), an e-commerce platform that has yet to generate significant revenue, and a burgeoning digital wallet/payments product that’s akin to Southeast Asia’s PayPal (NASDAQ: PYPL). The company got a kick earlier this month when the quiet period expired and Wall Street started doling out praises for the company. Most notably, Goldman Sachs (NYSE: GS) came out in full cheerleader mode for the company, setting a $22 price target; though we also have to note Goldman was lead left bookrunner on the IPO and we have to take its word with a bit (or a lot) of salt.

Yes, the company operates in some of the largest “tiger economy” countries in the world – but what happens when its games stop becoming popular? The teenagers that make up the majority of Sea’s fan base undoubtedly have changing tastes, and if they stop buying the virtual items that provide ~85% of Sea’s revenue, the company is lost. With net margins worse than -100% and losses doubling y/y, it’s not clear whether this company has a path to sustained growth.

At Sea’s current market cap of $4.5 billion, it’s valued at ~33% more than Zynga (NASDAQ: ZNGA), which has a market cap of $3.5 billion. Zynga has twice the revenue base of Sea and grew revenues by 23% in its most recent quarter, after a period of struggling with decline; and it also started turning profits in Q2 of this year. While I wouldn’t recommend either company, if you must buy a gaming company, at least go for Zynga.

Chart
SE data by YCharts

As seen from the chart above, Sea has started to slip from its IPO at the $15 handle. Practically the only positive factor supporting the stock’s valuation is the company’s exposure to Greater Southeast Asia (GSEA), but with the Sea’s rather poor execution, it may hardly matter. As I wrote in my initial article, it’s important for the company to show revenue diversification beyond gaming. If it’s going to aspire to be the Alibaba (NYSE: BABA) of GSEA, then it had better start showing monetization in e-commerce and payments – not just GMV increases. Q3, despite posting $3.2 million in revenues in the e-commerce segment for the first time, showed no meaningful progress in this regard as it’s still a tiny portion of the company’s overall revenues.

Continue to stay away from Sea. Better internet/e-commerce companies to invest in include PayPal (NASDAQ: PYPL), Etsy (NASDAQ: ETSY), and Stitch Fix (NASDAQ: SFIX). I doubt it’ll be long before Sea slips below $10, and even then at a $3 billion market cap, it’s still overvalued.

Q3 recap

Let’s take a closer look at Sea’s Q3, its first earnings release since going public (also note that usually, a poor reaction to the first earnings release is a terrible indicator for IPO momentum).

Figure 1. Sea Q3 revenues
Source: Sea Q3 earnings release

As seen in the chart above, taken from Sea’s Q3 earnings release, Digital Entertainment still commanded the lion’s share of business in Q3, with 85% of revenues (though this is down from 95% in the year-ago quarter). Total gaming revenues actually declined 7% y/y, however, to $79.8 million – illustrating just how risky it is to tether an entire business to online gaming.

Digital gaming’s gross margin also fell considerably to 30% in the quarter, down from 46% in the prior-year quarter. As a distributor, Sea doesn’t own the creative rights to games like League of Legends, and it’s subject to higher licensing fees by content creators. The entertainment industry as a whole is placing greater emphasis on content, which underpins Netflix’s (NASDAQ: NFLX) multi-billion dollar investment into Netflix Originals and deals like AT&T’s (NYSE: T) bid for Time Warner and Disney (NYSE: DIS) and Verizon’s (NASDAQ: VZ) interest in Fox (NYSE: FOXA). Even though Sea is in a slightly different industry and a continent away, the fundamental rules still apply: it’s the content owners that call the shots, not the distributors. While it’s too early to call Sea’s margin decline a sustained trend, the lack of real control over its margins will always be a risk.

Sea’s earnings release highlights billings growth instead of its rather lackluster revenue growth. This is a metric more commonly associated with enterprise software companies, calculated by adding the change in deferred revenues to revenue in any given quarter. Sea’s in-game items and virtual currency sales, as a refresher, are accounted for as deferred revenue on the balance sheet and are recognized as revenue as the items expire. Total billings grew 73% y/y to $151.7 million (also a 21% sequential growth rate from Q2), so this marks somewhat of a bright spot, but still doesn’t excuse the poor revenue growth seen in Q2.

In Sea’s “Other” segment – which accounts for its e-commerce (Shoppee) and financial services (AirPay) products, revenue grew 3x to $14.3 million, but at only 15% of the total revenue base, it’s still an insignificant contribution to Sea as a whole. Consider especially that this line of business has a negative gross margin – its cost of revenue is $27.7 million to produce $14.3 million of revenue, indicating nearly a -200% gross margin.

In “high growth mode,” profitability is less important – it’s forgivable if the company operates at a loss. But gross margin, at least, should be positive – especially for an internet business with few raw inputs beyond server costs and customer support bills.

The company finally started showing revenue in e-commerce ($3.2 million) that didn’t exist in the prior year quarter, but at such poor margins, investors can hardly be blamed for being less than enthusiastic.

Overall, the company produced a net loss of -$132.8 million in the quarter, approximately double 3Q16’s loss of -$65.6 million. A quick note here: most tech IPOs typically show large net losses due to stock comp; their pro forma earnings figures are a lot less scary when you add back these non-cash charges. Sea, however, has minimal stock-based comp expenses ($5.7 million), so its adjusted loss is still a frighteningly high figure, -$127.1 million.

Based even on its adjusted figure, Sea posted a -135% net margin and a per-share net loss of -$0.75. Not a company I’d want to bet my portfolio on.

60-second summary

Sea operates an oddball mix of businesses: gaming, e-commerce, and digital financial services. The latter two have much more synergy and are much more promising in the longer term, but at only 15% of the current revenue base, even hopeful investors have to agree that these businesses are years away from achieving meaningful scale.

Thus we have to look at Sea as a gaming business – an industry that’s notoriously fickle and prone to fads. In particular, what we saw in Q3 – declining revenues (despite billings growth) and contracting margins – sends out a scary signal for long investors in Sea. The company’s main revenue engine is seeing signs of weakness while its burgeoning e-commerce and fintech businesses are creating massive losses. At some point, it’s worth asking whether or not it’s realistic for a company like Sea to fulfill its vision of becoming GSEA’s Alibaba before running out of cash. More than likely, other Asian internet conglomerates (and there are plenty) will rush in to claim the market and knock Sea down to its heels. And with Sea’s gaming business weighing down the company with its lack of proprietary content and shrinking margins, I don’t really see Sea as an M&A target either.

Continue to avoid Sea – the limited support the stock has seen since going public will erode soon enough. There are better internet companies to invest in.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, IPO Analysis, Technology, Multimedia & Graphics Software, SingaporeWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Missed The Internet Boom? Here's Your Second Chance

Second chances are rare in the financial world. Once the whole market knows about a price run, it’s often too late to participate. However, there are a few exceptions to the rule. Right now, there’s a massive bull market taking shape that’s similar to the raging dot-com boom of the turn of the century.

While there are significant differences between the two booms, the differences make the new bull market less risky and longer lasting than the original.

If you missed the internet boom of 1997 to 2001, you are not alone. Believe it or not, many investors failed to participate in the exploding stock market during those heady times.

The good news is it’s not too late to participate in the next booming tech market!

Lessons Of The Dot-Com Bubble
I can’t say I blame the majority of those who missed the monster profits of the first internet boom. The Nasdaq soared from 1,000 to 5,100-plus, and stocks like Qualcomm (Nasdaq: QCOM) rocketed nearly 3,000% in value. At the end of the frenzy, the Nasdaq hit an outrageous price-to-earnings ratio of 200.

Rightfully fearful of the extreme valuations and warnings from luminaries like Warren Buffett, the majority of profits were captured by a select few. Most others either lost money or avoided stocks in the internet sector altogether.

Investors who didn’t take profits in time were crushed when the Nasdaq crashed nearly 80% from 2000 to mid-2002. Companies that made no fundamental or market sense disappeared from the exchanges, and many investors lost their nest eggs.

At the same time, some new stock market millionaires were minted. These were the investors who judiciously put their money to work and became wealthy when others lost it all.

I have discovered that controlling greed, diversifying, and using stop-loss orders are the keys to capturing profits while avoiding the inevitable crash of every boom-type scenario.

Sure, some people will get lucky by plowing all their capital into a single stock during boom times. However, most who take this tack will suffer the consequences. History has proven that this is hardly a reliable strategy.

The Bull Market Rising In The East
Right now, emerging markets, namely Asian economies, are in the midst of a massive internet boom. However, there are enormous differences between the U.S. internet bull market and the Asian one.

For one, most of the Asian internet companies participating in the thriving sector are earning substantial profits, rather than simply relying on oversized valuations. Even better, fundamental economic drivers like an aggressively expanding middle class, climbing disposable incomes, and the move from rural into urban areas act as long-term bullish fuel for the internet sector.

Remember, the majority of emerging-market consumers have never shopped at a big box retail store or owned an automobile. This opens up significant long-term growth potential for internet-based commerce. While the traditional retail infrastructure is lacking, internet use is exploding in the emerging markets. This sea-change enables consumers to access goods and services otherwise inaccessible and creates a tremendous opportunity for savvy investors.

Thanks to these fundamental economic drivers, Asian internet firms like Tencent Holdings (OTC: TCEHY) and Alibaba (NYSE: BABA) have seen their stock prices soar 100% over the last year. JD.com (Nasdaq: JD) and Baidu (Nasdaq: BIDU) are trading higher by around 50% over the same period. I fully expect this bull market to continue over the long term.

Don’t worry — you don’t have to design a diversified portfolio of Asian and other emerging-market internet stocks on your own. In fact, there’s an exchange-traded fund (ETF) that’s perfectly designed for this purpose.

The Emerging Markets Internet & Ecommerce ETF (NYSE: EMQQ) is trading higher by nearly 64% so far this year by following the EMQQ index.

The index is built on over 40 companies doing business in emerging markets — and even carries exposure to a few frontier markets. We’re talking about, for example, the internet and e-commerce sector in China, India, Brazil, Russia, and a full variety of emerging and frontier markets. It is a modified market-cap index, with the most extensive position capped at 10% to mitigate single-company risk.

The ETF’s largest holding is Tencent, with a 9.88% allocation, followed by Alibaba with a 9.62% stake and Naspers at 7.21%. The top 10 holdings make up around 50% of the total allocations with the rest diversified across a wide variety of emerging market internet names.

Risks To Consider: Tremendous political risks exist in emerging markets. Diversification across a variety of companies does not mitigate the risk of hostile political regimes that may come to power. Always use extra diligence when investing in emerging and frontier markets.

Action To Take: It is clear that the fundamental economic drivers are just starting to fire on all cylinders and this boom should continue for many years.
Buy now in the $39.50 per share zone as the stock finds support at the 50-day simple moving average. I suggest using a stop-loss at $34.23 per share, and my target price is $55-plus per share.

Editor’s Note: Unfortunately, investors who blindly follow Wall Street will miss out on their share of the $1.3 trillion world-changing opportunity Elon Musk is pioneering. Because while the Street is so busy harping on Tesla failures, they’re missing how Musk’s other master plan can line investors’ pockets with huge profits. If you trust Wall Street, this is NOT for you… but if you believe there’s more money out there than they’re willing to let you in on, then grab the full details on how you can take your share of this earth-shattering opportunity.

Sea: Not The Quarter We Were Looking For

I’ve never understood why any investors were particularly excited about the Sea (NYSE: SE) IPO, the Singapore-based internet platform that operates a digital gaming platform and distributes League of Legends in Southeast Asia (its biggest source of revenues), an e-commerce platform that has yet to generate significant revenue, and a burgeoning digital wallet/payments product that’s akin to Southeast Asia’s PayPal (NASDAQ: PYPL). The company got a kick earlier this month when the quiet period expired and Wall Street started doling out praises for the company. Most notably, Goldman Sachs (NYSE: GS) came out in full cheerleader mode for the company, setting a $22 price target; though we also have to note Goldman was lead left bookrunner on the IPO and we have to take its word with a bit (or a lot) of salt.

Yes, the company operates in some of the largest “tiger economy” countries in the world – but what happens when its games stop becoming popular? The teenagers that make up the majority of Sea’s fan base undoubtedly have changing tastes, and if they stop buying the virtual items that provide ~85% of Sea’s revenue, the company is lost. With net margins worse than -100% and losses doubling y/y, it’s not clear whether this company has a path to sustained growth.

At Sea’s current market cap of $4.5 billion, it’s valued at ~33% more than Zynga (NASDAQ: ZNGA), which has a market cap of $3.5 billion. Zynga has twice the revenue base of Sea and grew revenues by 23% in its most recent quarter, after a period of struggling with decline; and it also started turning profits in Q2 of this year. While I wouldn’t recommend either company, if you must buy a gaming company, at least go for Zynga.

Chart
SE data by YCharts

As seen from the chart above, Sea has started to slip from its IPO at the $15 handle. Practically the only positive factor supporting the stock’s valuation is the company’s exposure to Greater Southeast Asia (GSEA), but with the Sea’s rather poor execution, it may hardly matter. As I wrote in my initial article, it’s important for the company to show revenue diversification beyond gaming. If it’s going to aspire to be the Alibaba (NYSE: BABA) of GSEA, then it had better start showing monetization in e-commerce and payments – not just GMV increases. Q3, despite posting $3.2 million in revenues in the e-commerce segment for the first time, showed no meaningful progress in this regard as it’s still a tiny portion of the company’s overall revenues.

Continue to stay away from Sea. Better internet/e-commerce companies to invest in include PayPal (NASDAQ: PYPL), Etsy (NASDAQ: ETSY), and Stitch Fix (NASDAQ: SFIX). I doubt it’ll be long before Sea slips below $10, and even then at a $3 billion market cap, it’s still overvalued.

Q3 recap

Let’s take a closer look at Sea’s Q3, its first earnings release since going public (also note that usually, a poor reaction to the first earnings release is a terrible indicator for IPO momentum).

Figure 1. Sea Q3 revenues
Source: Sea Q3 earnings release

As seen in the chart above, taken from Sea’s Q3 earnings release, Digital Entertainment still commanded the lion’s share of business in Q3, with 85% of revenues (though this is down from 95% in the year-ago quarter). Total gaming revenues actually declined 7% y/y, however, to $79.8 million – illustrating just how risky it is to tether an entire business to online gaming.

Digital gaming’s gross margin also fell considerably to 30% in the quarter, down from 46% in the prior-year quarter. As a distributor, Sea doesn’t own the creative rights to games like League of Legends, and it’s subject to higher licensing fees by content creators. The entertainment industry as a whole is placing greater emphasis on content, which underpins Netflix’s (NASDAQ: NFLX) multi-billion dollar investment into Netflix Originals and deals like AT&T’s (NYSE: T) bid for Time Warner and Disney (NYSE: DIS) and Verizon’s (NASDAQ: VZ) interest in Fox (NYSE: FOXA). Even though Sea is in a slightly different industry and a continent away, the fundamental rules still apply: it’s the content owners that call the shots, not the distributors. While it’s too early to call Sea’s margin decline a sustained trend, the lack of real control over its margins will always be a risk.

Sea’s earnings release highlights billings growth instead of its rather lackluster revenue growth. This is a metric more commonly associated with enterprise software companies, calculated by adding the change in deferred revenues to revenue in any given quarter. Sea’s in-game items and virtual currency sales, as a refresher, are accounted for as deferred revenue on the balance sheet and are recognized as revenue as the items expire. Total billings grew 73% y/y to $151.7 million (also a 21% sequential growth rate from Q2), so this marks somewhat of a bright spot, but still doesn’t excuse the poor revenue growth seen in Q2.

In Sea’s “Other” segment – which accounts for its e-commerce (Shoppee) and financial services (AirPay) products, revenue grew 3x to $14.3 million, but at only 15% of the total revenue base, it’s still an insignificant contribution to Sea as a whole. Consider especially that this line of business has a negative gross margin – its cost of revenue is $27.7 million to produce $14.3 million of revenue, indicating nearly a -200% gross margin.

In “high growth mode,” profitability is less important – it’s forgivable if the company operates at a loss. But gross margin, at least, should be positive – especially for an internet business with few raw inputs beyond server costs and customer support bills.

The company finally started showing revenue in e-commerce ($3.2 million) that didn’t exist in the prior year quarter, but at such poor margins, investors can hardly be blamed for being less than enthusiastic.

Overall, the company produced a net loss of -$132.8 million in the quarter, approximately double 3Q16’s loss of -$65.6 million. A quick note here: most tech IPOs typically show large net losses due to stock comp; their pro forma earnings figures are a lot less scary when you add back these non-cash charges. Sea, however, has minimal stock-based comp expenses ($5.7 million), so its adjusted loss is still a frighteningly high figure, -$127.1 million.

Based even on its adjusted figure, Sea posted a -135% net margin and a per-share net loss of -$0.75. Not a company I’d want to bet my portfolio on.

60-second summary

Sea operates an oddball mix of businesses: gaming, e-commerce, and digital financial services. The latter two have much more synergy and are much more promising in the longer term, but at only 15% of the current revenue base, even hopeful investors have to agree that these businesses are years away from achieving meaningful scale.

Thus we have to look at Sea as a gaming business – an industry that’s notoriously fickle and prone to fads. In particular, what we saw in Q3 – declining revenues (despite billings growth) and contracting margins – sends out a scary signal for long investors in Sea. The company’s main revenue engine is seeing signs of weakness while its burgeoning e-commerce and fintech businesses are creating massive losses. At some point, it’s worth asking whether or not it’s realistic for a company like Sea to fulfill its vision of becoming GSEA’s Alibaba before running out of cash. More than likely, other Asian internet conglomerates (and there are plenty) will rush in to claim the market and knock Sea down to its heels. And with Sea’s gaming business weighing down the company with its lack of proprietary content and shrinking margins, I don’t really see Sea as an M&A target either.

Continue to avoid Sea – the limited support the stock has seen since going public will erode soon enough. There are better internet companies to invest in.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, IPO Analysis, Technology, Multimedia & Graphics Software, SingaporeWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here