Investor Insights:
- Billionaire David Tepper’s hedge fund recently bought 1.3 million shares of this stock.
- The company’s mobile user base has quadrupled in size over the past five years.
- For an outside-the-box way to earn 20%, I encourage you to check out this stock today.
The U.S.-China trade war is about 500 days old.
Repeated attempts by each side to raise the stakes have extended the event. President Donald Trump has even considered delisting Chinese companies from U.S. stock exchanges.
That would be unprecedented … and of course bad for these Chinese companies. U.S. markets are a major source of liquidity.
But not everyone thinks things will go that far. Some hedge funds — aka the smart money — are betting otherwise…
You Can Bet on This Billionaire
David Tepper’s Appaloosa Management isn’t letting the rhetoric get in its way.
Tepper is a billionaire. One of his most famous calls started the “Tepper Rally.”
His hedge fund had focused on bonds up until the financial crisis, but it made a change. He talked about that in 2010 when he appeared on CNBC.
He said: “What, I’m going to say: ‘No, Fed, I disagree with you, I don’t want to be long equities’?”
His fund made 132% in 2009, most of it in stocks. It earned $7.5 billion by following the Federal Reserve’s telegraphed moves to prop up banks.
He’s added many more billions to those gains over the years.
Today, you can follow him into a trade and add gains to your own portfolio.
The Amazon of China
Tepper made his postcrisis money by betting with the Fed. Now he’s betting against the White House.
Appaloosa started a new position in Chinese firm Alibaba Group Holding Ltd. (NYSE: BABA) in the third quarter.
Alibaba’s three main e-commerce websites are Alibaba, Taobao and Tmall. The sites are a big deal. They account for more than half of all e-commerce sales in China.
Known as the “Amazon of China,” it’s one of the largest e-commerce companies in the world. Its monthly active user base of 755 million is more than double the current U.S. population.
Appaloosa bought 1.3 million shares, worth $240 million at today’s price.
Tepper is saying this U.S.-China angst is overblown — at least with respect to certain Chinese companies.
Appaloosa Isn’t the Only 1
In their most recent filings since the end of the second quarter, 21 investment firms grew their positions in Alibaba by more than Appaloosa.
That’s saying something. We’re talking hundreds of millions — and in some cases, billions — of dollars of investments. In a three-month period.
Another hedge fund I like is Tiger Global Management. Tiger made nearly 14% last year while the S&P 500 Index lost money.
Tiger grew its BABA stake this past quarter. It increased its holdings by 3.4 million shares. Tiger now owns nearly 7.8 million shares worth $1.4 billion.
These Numbers Are Tough to Beat
Alibaba shares closed the second quarter at just under $170. They finished the third quarter within a couple dollars of that.
But they’ve been moving higher since:
Alibaba’s Stock Is Soaring in the Fourth Quarter
Alibaba is doing a solid job. Its financial statements are pristine … like those of the tech firms in Silicon Valley.
It has $57 billion in cash. It generated nearly $19 billion of free cash flow (cash from operations minus capital expenditures) over the past year.
And analysts expect BABA will see its largest-ever free cash flow this quarter: $9.5 billion.
Alibaba has grown its monthly mobile user base by at least 100 million people in each of the past five years. The base has quadrupled over this stretch. As it grows, so does the firm’s bank account.
And the smart money expects that to continue.
Earn up to 40% in a Forbidden Land
If you’re looking for an outside-the-box trade, you may want to follow the smart money. I encourage you to look into Alibaba stock today.
I expect its stock price to increase at least 20% in the near future.
And it appears the U.S. and China will remain each other’s nemesis for a while. But if they decide to reach a short-term agreement in their trade war, I believe Chinese stocks such as Alibaba will see the most benefit.
That could mean doubling your returns and grabbing 40% gains instead.
Good investing,
Editor, Profit Line
P.S. I wanted to share another kind of outside-the-box thinking with you in a quick five-minute video. You can watch it now by clicking on the image below:
