Connect with us

Stock Picks

Should You Short Alibaba?

Published

on

A blog post about Alibaba and Chinese e-commerce companies more broadly by an accounting/auditing blogger has recently made its rounds on the internet. Most investors first became aware of it after is was shared on Twitter by Muddy Waters Research, an investment company specialized in revealing frauds and scams in Chinese companies and then taking short positions in the stock.

Muddy Waters is a highly respected firm that many traders follow for tips on possible shorts. The company has also made good money in the past by exposing inflated numbers and frauds in the stock market.

On the same day as Muddy Waters sent out the tweet, Barron’s picked up the story and later offered Alibaba to comment on it, but the company declined.

The blogger in the center of all of this, who says he prefers to remain anonymous, points to the sales figures released by Alibaba after the 11/11 shopping spree, aka Single’s Day in China, as ridiculous and too good to be true. For example, he mentions that Alibaba’s sales for just this one day came in a little over K-mart or Sears’ total annual revenue.

Alibaba vs. Amazon

The best comparison to make to get the numbers in perspective, however, is Amazon. So, let’s take a look at how Amazon’s numbers compare to Alibaba’s so you can make up your own mind on whether you believe them or not:

  • Alibaba Single’s Day revenue (1 day!): US$25 billion
  • Amazon 2016 Q4 revenue (91 days): US$43.7 billion

In other words, Alibaba in just one day sold a little more than half of what Amazon (including AWS) sold in all of Q4 2016.

The blog author, along with Muddy Waters and various people on Twitter, are mocking these numbers and Alibaba by pointing to Alibaba’s logistics system in China as incapable of delivering packages at this scale.

Anyone who has spent some time in Chinese cities have seen how packages are sorted on sidewalks in seemingly random locations around town.

Or as the author puts it, “why invest in all that expensive GPS, scanning, package, tracking automation when you can just dump your packages on the sidewalk and let homeless people figure out how to get them where they are supposed to go?”

Still, most people who have spent time in China would also agree that this seemingly chaotic system in fact works incredibly well, packages rarely get lost, and delivery is unbelievably fast.

Those who know China also know how huge online shopping really is here, not to mention on days like 11/11. Thanks to extremely low shipping fees, fast delivery, and easy-to-use shopping apps for smartphones, online shopping is much bigger in China than in any Western market like the US or Europe. According to available statistics figures, 20% of Chinese retail is online compared to 9.1% in the US.

Also, keep in mind that Alibaba is a massive company, with much more than just Alibaba.com as part of its business. For example, Taobao.com is the number 1 e-commerce platform in China, connecting shoppers with independent sellers. Tmall.com is also a huge player, but is more focused on sales from well-established businesses and brands. Take a look at the full picture below:

Alibaba businesses

Alibaba’s organizational structure is a mess

While I am skeptical of the notion that all of Alibaba’s numbers are somehow made up, the same blogger deserves credit for pointing out some interesting things about the company’s organizational structure in another post on his blog.

Their structure is, to put it mildly, a huge mess. Take a look for yourself in the chart below:

Alibaba organizational structure

Perhaps the most interesting thing about this is the footnote to the chart not shown here. According to the footnote found on the SEC website, there are approximately 120 entities incorporated in China and other countries + about 200 subsidiaries and consolidated entities that are not included in the chart.

One can easily argue that the only possible reason for structuring a company as a labyrinth at this level is to make it effectively un-auditable and eliminate any risk for Jack Ma himself and other key people in the company.

Also, investors should really ask themselves what type of ownership claim they have on Alibaba’s business when buying shares in the Cayman Islands holding company, which what is traded on Wall Street. It is very unclear what, if any, ownership claim they have on the real-world business that Alibaba conducts from its Hangzhou, China headquarters.

As a final point, it also remains unclear who actually audits Alibaba. Officially it is audited by PwC Hong Kong, but the reality may be different. Most likely, Alibaba is audited by PwC on the mainland, and signed off by their colleagues in Hong Kong, who are operating under a completely different set of rules.

To summarize:

  • Alibaba has lots of brand names operating under its umbrella, some in China and some globally.
  • 20% of Chinese retail is online vs. 9% in the US.
  • China’s online population is 751 million people vs. 287 million in the US.
  • Alibaba’s shares traded in the US is for a Cayman Islands holding company, with unclear connections to the real-world business operations in Hangzhou.
  • We know very few details about how Alibaba is audited.

Should you short Alibaba?

My simple answer at this time is still no. While their revenue figures seem extremely high, I don’t necessarily think they are inflated. Other aspects of their business, such as the corporate structure and auditing issue, seem more questionable to me.

Alibaba chart

The stock has gained about 100% so far in 2017, and with momentum like that, shorting can be dangerous. However, if we see clear signs of a slow-down in the Chinese economy going into 2018, Alibaba would be high on my list of potential stocks to sell short.

The next few days will tell us if the recent uptrend in the price will be maintained, or if the price will break down below the trend line. If a break-down does happen, an opportunity to short may present itself even sooner.

Keep a close eye on Alibaba’s stock price in the first few weeks of December for confirmation of where the market is going.

Featured image from Pixabay.

Disclaimer: The author does not hold any positions in Alibaba or related companies.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.3 stars on average, based on 35 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




Feedback or Requests?

Stock Picks

Stock Picks: ADM and CELG

Published

on

The S&P 500 (SPX) continued its drop as it closed yesterday, June 18, 2018 at 2,773.75. We maintain our bullish outlook despite this slight dip. This brief pullback is most likely setting up the index for a higher low.

As SPX remains bullish, let’s look at stocks that show promise.

ADM – Archer-Daniels-Midland Company

The Archer Daniels Midland Company (ADM) is an American global food processing and commodities trading corporation.  Founded in 1902, they now have more than 270 plants and 420 crop procurement across the globe. The company processes and manufactures vegetable oil, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients.

Technical analysis show that ADM is about to take out resistance of 47. This would trigger the large inverse head and shoulders reversal pattern on the weekly chart. To increase the odds of a successful breakout, the stock must generate volume of at least 7.2 million shares on the daily chart. Those who bought the higher low of 40 are likely to take profits at the resistance. ADM needs buyers to absorb the selling pressure.

Furthermore, fundamental analysis reveal that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of ADM is 15.93.  The stock appears undervalued considering that it has a five-year maximum of 26.46 and an average of 17.46. Plus, recent earnings report beat expert estimates. Based on these figures, the stock has some room to grow.

The strategy is to buy the breakout at 47 as long as the pair generates the required volume. Once breakout is complete, bulls have the momentum they need to climb to our target of 60.

The process may take more than three months.

Weekly ADM Chart

Monthly ADM Chart

As of this writing, the Archer-Daniels-Midland stock (ADM) is trading at 46.19.

Summary of Strategy

Buy: Buy the breakout of 47 after the pair generates 7.2 million volume on the daily chart.

Target: 60

Stop: Close below 45 after the breakout.

CELG – Celgene Corporation

Celgene Corporation (CELG) is an American biotechnology company founded in 1986. It discovers, develops and commercializes medicines and therapies for the treatment of cancer and inflammatory diseases. In their product portfolio are REVLIMID (lenalidomide), POMALYST/IMNOVID (pomalidomide), OTEZLA (apremilast), ABRAXANE (paclitaxel albumin-bound particles for injectable suspension), VIDAZA, azacitidine for injection (generic version of VIDAZA), THALOMID (thalidomide), and the epigenetic modifier ISTODAX. Celgene’s subsidiaries include, among others, Juno Therapeutics, Impact Biomedicines, Inc., Signal Pharmaceuticals, and Pharmion Ltd.

Technical analysis show that CELG appears to respect support of 75. This view comes after the pair has managed to stay above the support for the last four weeks. This is because bulls are starting to show up. The significant rise in volume in May 2018 indicates that bulls are buying the stock. On top of that, the stock is almost oversold, suggesting the possibility of a bounce.

In addition, fundamental analysis reveal that CELG’s trailing twelve months (TTM) PE ratio stands at 21.88. The stock appears fairly valued but it has a five-year maximum of 64.24 and an average of 44.44. Moreover, the company’s recent earnings report beat analyst estimates. Considering these figures, CELG has some upside potential.

The strategy is to buy on dips as close to 75 as possible. If bulls preserve the support, they may spark a rally to our target of 98.

The process may take more than three months.

Weekly CELG Chart

Monthly CELG Chart

As of this writing, The Celgene Corporation stock (CELG) is trading at 77.73.

Summary of Strategy

Buy: As close to 75 as possible.

Target: 98

Stop: Close below 74.

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

3.7 stars on average, based on 181 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




Feedback or Requests?

Continue Reading

Stock Picks

Stock Picks: PANW, TCRD, EVLV

Published

on

By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

 

In our latest reviews, we highlighted the importance of insider transactions, which may lead to very high yield in the respective stocks. Today, we will again review the stocks with high insider activity. We won’t consider biotech companies here, as they may be very risky.

Palo Alto Networks (NYSE: PANW)

Number one by trading volume is Palo Alto Networks, quoted as PANW on NYSE. It belongs to the Technology (Networking & Communication Devices) sector. The insiders bought shares worth $13,380,262 in June.

Palo Alto Networks was founded in 2005 and is based in Santa Clara, California. It specializes in developing cyber security platforms for business throughout the world. As of now, PANW caters to over 50,000 customers in 150 countries.

Palo Alto Networks is a large company, although its IPO took place as recently as in July 2012.

In 2017, its earnings amounted to $1.8B, which is 28% more than in 2016. Through 2011-2016, Gartner named Palo Alto Networks as the leader in cyber and computer security. In 2016, Bay Area, an SF Business Times agency, named Palo Alto Networks as ‘the best place to work at’. Currently, over 5,100 people are employed with PANW.

Arora Nikesh, PANW CEO, bought shares worth $13,380,262 at $198.79 to $216.07. Curiously enough, Nikesh became CEO on June 6, and began buying shares as soon as on June 8. Before coming to PANW, Arora Nikesh was Executive Director at Google, and sold some Google shares in April.

It looks like Mr Nikesh got some free capital after selling Google and wanted to invest it as soon as possible. Eventually, after becoming CEO at Palo Alto Networks, he decided to buy some shares at his new company.

Financially, PANW is very reliable, with all latest earnings reports exceeding expectations of both the management and the analysts.

Over the last week, the stock broke out its historic resistance at $200 and is currently still growing.

On D1, the price broke the 200-day SMA as early as in mid 2017, and ever since there have been no resistance that could stop it. The ascending trend is still here to stay; with the record highs hit, there is no immediate resistance, while the support is at $200.

Meanwhile, the short float is as low as 4.93%.

THL Credit (NASDAQ: TCRD)

THL Credit, quoted as TCRD on NASDAQ, is our number two for today. This company belongs to the Financial (Asset Management) sector. The insiders bought shares worth $848,922 in June.

THL Credit was founded in 2009, and is headquartered in Boston, Massachusetts. This investment firm manages a total of $12.1B. THL Credit has regional offices in Chicago, Dallas, Los Angeles, and New York City. The company majorly invests funds into mid-price securities, which are chiefly stocks of the companies with a yearly turnover of at least $25M. THL Credit does not invest into startups or companies with large debts. The initial investment amount is $10M to $25M.

TCRD Q1 earning reports came positive, with a revenue of $16.7M; still, the stock price did not go up, as the analysts had expected the earnings to be at $18.3M. When the reports came out, the stock price went down by 13%. It may seem strange, as good earnings usually should mean the stock price rise, but, in practice, good news does not always lead to this.

Insider transactions were made by the Chief Operations Officer, Olson Terrence, who bought some THL Credit shares as early as in Sep 2017; by then, the price was $9 per share, and the total amount was $17,579. The next SEC report by Terrence came in March 2018, with shares worth $10,263. On the same day, two other board members bought shares worth $136,680 at around $8.20.

Terrence continued buying shares on April 16, and such buys occurred nearly everyday, up to now, with the minimum amount of $60,000 and the maximum at $139,000. We may soon learn the reason for such massive buys by Olson Terrence, as no other board member did it.

Technically, there is an descending trend, with the price being below the 200-day SMA. However, there is also a consolidation pattern formed since March between $7.70 and $8.00. On June 7, THL Credit broke out the support at $8.00 but failed to go through the resistance at $8.40, and is currently testing the upper boundary again.

EVINE Live (NASDAQ: EVLV)

EVINE Live (NASDAQ: EVLV) takes the third place today. This company belongs to the Services (Catalog & Mail Order Houses) sector. When it comes to insider transactions, it falls behind the leaders, with the total amount of just $52,572.

EVINE Live was founded in 1990 and is headquartered in NYC. The company focuses on selling goods via web, TV, mobile apps, and social networks. Through EVINE Live, one can buy jewelry, home appliances, textile, kitchenware, accessories, footwear, etc. The company has access to over 86M of homes through television, while also offering their products on evine.com.

EVINE Live issued its Q1 earnings report on May 30. The net sales came at $156.50M, which is 0.1% more than in Q1 2017, when the sales were $156.30M. However, the increase in sales did not help the company to make any profit, and its loss for Q1 2018 was $3M, which is 7% more than in Q1 2017. Overall, Q1 reports are far from optimistic.

However, two board members did buy shares, although the amounts are not that high, those being $6,032, $22,834, and $23,706. Before that, insiders bought shares as long ago as in Dec 2017, and the share price did not go up. What really matters here, though, is the current price, which is just $1.18; as long as it goes up by just 2 or 3 dollars, the yields will get doubled or tripled. Perhaps this is the very reason why the insiders bought the shares, while there may be some other reasons for that, of course.

Back in 1998, EVLV price broke out the 200-day SMA and had been growing for around two years. The price went from $4 up to $65, with the yield being 1,500%, although it had been trading for long below $5. This may repeat any time in the future.

Currently, the price is making its second attempt to break out the 200-day SMA and form an ascending trend. The support is at $0.90, and the immediate resistance lies at $1.60.

Short positions are scarce, with the short float being below 1%.

 

Disclaimer

Any forecasts contained herein are based on the authors’ particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.5 stars on average, based on 3 rated postsHaving majored in both Social Psychology and Economics, Dmitry went on to continue his education in post graduate. He then worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped him to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. Dmitry is a pro in the financial field who authors articles for various international media. He also holds the position of Chief Analyst at RoboForex.




Feedback or Requests?

Continue Reading

Stock Picks

Stock Picks: UAL and AES

Published

on

The S&P 500 (SPX) pulled back last week. This dip is healthy as it enables the index to regroup before mounting a push to take out resistance of 2,800. The surge in volume on Friday, June 15, 2018 gives us confidence that bulls are once again buying.

With the SPX flashing signs of strength, let’s look at stocks that offer profitable trade setups.

UAL – United Continental Holdings Incorporated

United Continental Holdings Incorporated (UAL) is an airline holding company that transports both people and cargo. The company owns and operates United Airlines, Incorporated and has air rights in North America, Asia-Pacific, Europe, Middle East, Africa, and Latin America. As of 2016, the company has total assets worth $40.140 billion.

Technical analysis show that UAL is creating a large cup and handle continuation pattern on the weekly and monthly charts. This view comes after the pair generated a higher low of 60.44 in February 2018. The stock has been rallying since and it looks primed to take out resistance of 75.

To complete the breakout, the stock must print 6 million shares on the daily chart. Those who bought the higher low are likely to take profits at 75. The stock needs buyers to absorb the selling pressure.

Furthermore, fundamental analysis reveal that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of UAL is 10.13.  The stock is undervalued considering that it has a five-year maximum of 52.80 and an average of 13.80. Based on these figures, the stock has some room to grow.

The strategy is to buy the breakout at 75 as long as the pair generates the prescribed volume. Once breakout is complete, bulls have the momentum they need to climb to our target of 100.

The process may take more than three months.

Weekly UAL Chart

Monthly UAL Chart

As of this writing, the United Continental Holdings Incorporated stock (UAL) is trading at 73.80.

Summary of Strategy

Buy: Buy the breakout at 75 after the pair generates 6 million shares on the daily chart.

Target: 100

Stop: Close below 70.

AES – The AES Corporation

The AES Corporation (AES) is a Fortune 500 company based in Arlington, Virginia. It generates and distributes electrical power in 15 countries and employs over 10,000 people all over the world. In 2017, the company generated $11 billion revenues while managing assets worth $33 billion.

Technical analysis show that AES is attempting to break out of the cup and handle pattern on the weekly and monthly charts. However, it appears that the stock is not yet ready to take out resistance of 13.

We have this view because the monthly and weekly candles are detached from the 4-day, 8-day, and 21-day moving averages. This tells us that the move up is not sustainable. Also, the pair is flashing overbought readings on the weekly chart. What we can do is to wait for a slight pull back before placing buy orders.

On the other hand, fundamental analysis reveal that AES’s trailing twelve months (TTM) PE ratio stands at 27.98. The stock appears overvalued but it has a five-year maximum of 105.43. In addition, recent company earnings report beat expert estimates. Considering these figures, AES has some upside potential.

The strategy is to buy on dips as close to 12 as possible. If bulls preserve the support, they may finally take out resistance of 13 and ignite a rally to our target of 15.50.

The process may take more than three months.

Weekly AES Chart

Monthly AES Chart

As of this writing, The AES Corporation stock (AES) is trading at 13.10.

Summary of Strategy

Buy: Buy on dips as close to 12 as possible.

Target: 15.50

Stop: Close below 11.50.

 

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

3.7 stars on average, based on 181 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




Feedback or Requests?

Continue Reading

10 of 15 Seats Available

Learn more here.

Recent Comments

Recent Posts

A part of CCN

Hacked.com is Neutral and Unbiased

Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

Trending