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Gurus Continue Owning Alibaba Despite China Crackdown

Shares of Alibaba fall as Beijing plans to break up Alipay

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Sep 13, 2021
Summary
  • Beijing plans to break up Ant Pay’s Alipay and create a separate app for the loan business.
  • Alibaba shares continue to fall, yet several gurus bought shares over the past three months.
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According to the Hot Picks of Gurus Screen, a Premium feature of GuruFocus, more than 20 gurus bought shares of Alibaba Group Holding Ltd. (

BABA, Financial) during the past three months despite the ongoing crackdown of major Chinese technology companies.

On Monday, the Financial Times reported that Beijing planned to break up Alipay, the mobile and online payment platform owned by Alibaba’s Ant Group. Regulators also plan to create a separate app for the fintech giant’s loans business according to Financial Times.

Alibaba’s Hong Kong-based shares (

HKSE:09988, Financial) closed at 160.80 Hong Kong dollars ($20.67), down 4.23% from the previous close of HK$167.90 ($21.58). According to GuruFocus’ exclusive valuation method, Alibaba’s Hong Kong-based shares are significantly undervalued based on Monday’s price-to-GF Value ratio of 0.44.

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Gurus are unfazed on China crackdown

Twenty-seven gurus bought shares of Alibaba (

BABA, Financial) during the second quarter, compared to just eight gurus selling shares. Gurus that had the highest impact to portfolio for their trade in Alibaba include Mohnish Pabrai (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Al Gore (Trades, Portfolio)’s Generation Investment Management, Mason Hawkins (Trades, Portfolio)’ Southeastern Asset Management and Charles Brandes (Trades, Portfolio)’ Brandes Investment Partners.

Pabrai

Having established a 168,843-share stake in Alibaba during the first quarter, Pabrai added 89,878 shares to the position during the second quarter, increasing the position 53.23% and the equity portfolio 7.34%. The shares occupy 21.13% of Pabrai’s U.S.-based equity portfolio, which makes up a fraction of the guru’s total assets under management.

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Pabrai invests primarily in smaller-cap and out-of-favor companies. As of the second quarter, the guru’s U.S.-based portfolio contains just three stocks: Alibaba, Micron Technology Inc. (

MU, Financial) and Seritage Growth Properties (SRG, Financial).

Tweedy, Browne

Tweedy Browne (Trades, Portfolio) purchased 438,406 shares of Alibaba during the second quarter, increasing the position 39.53% and its equity portfolio 2.79%. According to top 10 holdings statistics, a Premium feature, Alibaba is the firm’s second-largest holding with a 9.86% weight.

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The New York-based firm seeks long-term capital appreciation by investing in domestic and foreign stocks that are undervalued. The firm also hedges its foreign currency exposure back to the U.S. when applicable.

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Tweedy Browne (Trades, Portfolio)’s other top holdings include Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), Alphabet Inc. (GOOGL, Financial)(GOOG, Financial) and Johnson & Johnson (JNJ, Financial).

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Generation Investment

Generation, the London-based firm co-founded by Gore and David Blood, purchased 921,211 shares of Alibaba during the second quarter. The transaction increased the equity portfolio by 0.87%.

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Generation focuses on a long-term investment perspective, emphasizing companies that strategically manage their economic, social and governmental performances.

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Southeastern Asset Managment

Hawkins’ Southeastern Asset Management purchased 146,702 shares of Alibaba during the second quarter, increasing the position by 41.03% and equity portfolio by 0.67%.

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Southeastern seeks long-term capital appreciation by investing in the common stock of companies with understandable businesses and strong balance sheets that are run by solid management teams and trade at a discount to intrinsic value based on discounted cash flows.

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Brandes Investment Partners

Brandes Investment Partners purchased 85,314 shares of Alibaba during the second quarter, increasing the position 156.76% and the equity portfolio by 0.43%.

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Founded by a Benjamin Graham disciple, the firm seeks to purchase out-of-favor companies that are trading at discounts to intrinsic value.

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