Search

After Jack Ma, is Alibaba an enduring 100-year growth machine?

Hi All, what a great week, stock market seems to be on steroids after the 22nd May 2020 rout (HSI, SSE, STI). Again, showing how news can be pessimistic one day and turning optimistic in the span of less than 2 weeks. It is important to keep an independent view of the market rather than get swayed by headlines.


Also, would like to take this opportunity to thank NextInsight (a hub for serious investors) for sharing EngineerInvest articles and my personal story. We are thankful that our first article “10% Dividend Small Cap Stock & a Potential Multibagger” managed to rank top of the Most Read List. Well done to the reader who emailed me that he managed to buy it cheaper than my $0.79 buy price. Great job!! Share price has surged more than 17% at this point of writing (and this is excluding the dividend yields return). Do note that the article was published on 16th May 2020. Currently, it has already passed Ex-D date on 21st May 2020. I can’t predict the market but my guess is that there might be some pullback soon after 3 days of continuous big gains.

~~~~~~~~~~~~~~~~~~~~~~~~~ Article continues below ~~~~~~~~~~~~~~~~~~~~~~~~~

My previous articles:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Alibaba – Clock Building or Time Telling?

We did a poll to gather opinions.


Clock Building and Time Telling are concepts featured from the book “Built to Last.”


To have a charismatic, brilliant leader with a thousand helpers is Time Telling while developing an organization culture that excels beyond the time of any leaders is Clock Building.


Building success on one remarkable idea is Time Telling while developing an organization that generates numerous remarkable ideas over time is Clock Building.

“Enduring greatness requires Clock Building.”


“Bill Hewlett and Dave Packard’s ultimate creation wasn’t the audio oscilloscope or the pocket calculator. It was the Hewlett Packard Company and the HP Way.”

From the book Built to Last: Successful Habits of Visionary Companies Book by James C. Collins and Jerry I. Porras

In retrospect, there wasn’t an option for “neither” on the poll 😅. Not needed right?

[3]

The book “Built to Last”

Some of you might be familiar with the book “Good to Great.” “Built to Last” is written by the same author James C. Collins (and Jerry I. Porras). The book talks about the successful habits that makes a company visionary and the characteristics of enduring companies that continues to thrive despite the passing of their founder’s time. A quick summary of the characteristics written in the book [4]:

  • Clock Building, Not Time Telling: Explained above^

  • Big Hairy Audacious Goals (BHAGs): Companies should aim for the moon albeit risks and challenges.

  • Cult-like Cultures: Employees feel like they have a stake in the company and cares for its survival and success. Honest mistakes that do not infringe the company’s ideology are condoned. However, infringement of the company’s ideology is not tolerated.

  • Try a Lot of Stuff and Keep What Works: Generate many new businesses and keep those that drives profits. For example, 3M Post-it note might seem accidental but the 3M environment isn’t. The environment facilitates the creation of cutting-edge products.

  • Home-grown Management: The company is led by those who spent years in the company, concurs with its core ideology and understands the company’s operation.

  • Good Enough Never Is: The company never stops improving itself, achieving bigger and bigger milestones. Furthermore, there are mechanisms in place to create “discomfort”, to kill complacency and hence, sparking change and improvement way ahead of market demand.

  • More than profits: Growing profits and profitability is just a necessary condition for existence. Beyond profits, the company should serve a purpose to benefit humanity.

Examples of visionary companies mentioned in the book are 3M, Walt Disney, American Express, etc. The book draws on 6 years of research work at Stanford University on 18 remarkable companies that have an average history of 100 years and outperformed the stock market since 1926 [5]. Comparisons with competitors were also done. Do check the book out!


“Our basic principles have endured intact since our founders conceived them. We distinguish between core values and practices; the core values don’t change, but the practices might. We’ve also remained clear that profit - as important as it is - is not why the Hewlett Packard Company exists; it exists for more fundamental reasons.” John Young, Former CEO, Hewlett-Packard 1992

Is Alibaba Clock Building or Time Telling?

My view of Alibaba is more of Clock Building than Time Telling. My guess for Jack Ma who chose to leave Alibaba at 50+ yet with “indirect” control of the company is not really to enjoy his retirement but a test to see if the company continues to thrive from the system he built. That is why I preferred Alibaba over JD.com as a long-term investor.


Alibaba’s Vision Statement [6]:

“We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba. We do not pursue size or power; we aspire to be a good company that will last for 102 years.”


Jack Ma announced in 2017 that Alibaba would create more than 100 million new jobs to become the 5th largest economy in the world, after US, China, EU and Japan by 2036 [7]. If this isn’t BHAGs & “More than Profits”, I don’t know what is.

Cult-like Cultures? Take a look at Alibaba’s Employee Rally in the year 2009 [8]


I’ve started investing in Alibaba early since the year 2015 when it was listed in the US market, accumulating it over a period of time.

Subsequently, I sold all of my Alibaba holdings (NYSE:BABA) prior to the March crash as shown in my sell receipt posted in my previous article and bought back Alibaba (9988.HK). I was lucky to have avoided the COVID-19 crash and bought Alibaba back at a cheaper price. As much as I am tempted to time the market, I strongly advise against doing so as nobody could predict the market. I’m probably just lucky since I already had the intention to switch to Alibaba (9988.HK).


~~~~~~~~~~~~~~~~~~~~~~~~~ Article continues below ~~~~~~~~~~~~~~~~~~~~~~~~~

My Story “From N-Level to Masters, From $20k at 19 to over $1m at 33” (Also shared by Dr Wealth / theFinance.sg / NextInsight, etc.) >> About me

View >> my Portfolio


Join us on FB/Telegram for more regular insights!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


Reason for switching to Alibaba (9988.HK) is due to US’s threat of delisting Chinese companies. This is not new news. In fact, Trump was already talking about it last year [9]. It may not happen though but I do not want to be in that position if it does.

Do join us in our Telegram (Click Here) and Facebook (Click Here) as I will reveal my partial portfolio shown above sometime next week.


I have not touched on the financials of Alibaba Group, investment moat/story etc. Will probably work on a more thorough article on Alibaba Group and explain further why it is my top 3 largest holdings.

Tmall Unveils Interactive 3D Shopping Experience [10]


Another Chinese company which is one of my top holdings is Ping An (2318.HK). Despite being an insurance company, Ping An has filed for a total of 23,933 patent applications as of 31st Mar 2020. Of which, 5,567 were filed under the Patent Cooperation Treaty (PCT) or abroad [11]. According to World Intellectual Property Organization (WIPO), Ping An ranked eighth in the world for the number of published patent applications filed under PCT [12]. Another Clock Building/Built to Last company?


Do check out my article on Ping An (2318.HK) written in the year 2018 where I disclosed my purchase price of Ping An at HKD$30+.

Alibaba History: 20 Years in 3 Minutes [13]


I’m on the hunt for great companies especially in the Chinese stock market. Stay tuned for more articles ahead!!


Cheers & Great Weekend!!


Disclaimer: Just sharing from experience as I have put my own money into the stock market over the period of 17 years. I am not a Chartered Financial Analyst (CFA) Charterholder and do not have any finance-related qualifications. Please also check out our full disclaimer.


The best compliment the Engineer can receive is your referral/sharing of EngineerInvest.com to your family & friends.


Visit >> The Engineer's Mall

Reach out to me at engineerinvest.biz@gmail.com


Reference Links:

1.http://www.aastocks.com/en/stocks/quote/detailchart.aspx?symbol=02660

2.https://www.nextinsight.net/

3.https://imgflip.com/i/43yaeg

4.Built to Last : Successful Habits of Visionary Companies Book by James C. Collins and Jerry I. Porras

5.https://www.goodreads.com/book/show/4122.Built_to_Last

6.https://www.alibabagroup.com/en/about/overview#:~:text=Our%20Vision,will%20last%20for%20102%20years.

7.https://www.dailysabah.com/business/2017/06/16/alibaba-to-become-worlds-fifth-largest-economy-by-2036-founder-says

8.https://www.youtube.com/watch?v=u-ogswmH00o&t=11s

9.https://www.reuters.com/article/us-usa-trade-china-limits/on-u-s-delisting-threat-china-says-decoupling-would-harm-both-sides-idUSKBN1WF0M5

10.https://www.youtube.com/watch?v=7vX2UVSwD8o

11.https://www.prnewswire.com/news-releases/ping-an-reports-yoy-growth-of-5-3-in-operating-profit-attributable-to-shareholders-of-the-parent-company-in-q1-2020--301046143.html

12.https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0423/2020042301355.pdf

13.https://www.youtube.com/watch?v=eMn0MigDjn4&t=115s

14.Google finance


"An investor should act as though he had a lifetime decision card with just twenty punches on it"  - Warren Buffett

© 2018 to present - EngineerInvest.com