In his recent video, Adam Khoo, a famous value investor in Singapore, shared that he has sold out of his Tencent positions and plans to exit his positions in Alibaba, Pingan Insurance, and Chinese ETF soon. This comes after the aftermath of the Chinese government’s crackdown on the gaming sector, limiting people’s spending and time on games.
Adam has previously held on to his Chinese stocks, which he felt were severely undervalued, when the Chinese government was clamping down on Chinese tech companies back in 2021 because he still believed that they had great fundamentals and would one day rise back to their intrinsic value.
The latest episode proved to be the final straw for Adam as he decided to sell all their China stocks and stop investing in China stocks due to government intervention and unpredictability, and instead focus on US stocks in a more pro-business environment.
10 Reasons Why Stock Price Fall
Adam also shared 10 reasons why stock prices will fall and they are summarized in this slide below:
The only time he would sell a stock is when reason number 10 happens, where there is a structural problem that hampers the business model or causes the business to not be able to grow to its fullest potential over the long run.
What About Alibaba?
Adam Khoo has always been a big fan of Alibaba since years ago, but this time round, he will also exit his positions in Alibaba when he sees an opportunity in the near term.
He foresees that after the recent sell-off in Chinese stocks, there could be a bounce and he is waiting for the share price to potentially reach USD140 or USD200 before selling off his shares in Alibaba. With the redeemed capital, he will invest in US companies that are in a more pro-business environment.
Concluding Thoughts
I sold out my Alibaba shares sometime in early 2023 after holding them for 2 years and suffered a 55% loss in capital. I wanted to recoup my capital to invest in something else because I feel that China stocks will take many years to finally realise their true value.
Back in Jan 23, there was a nice run-up for BABA, so I exited around USD119. Looking back, it seems like a good decision despite the S$8k loss because Alibaba’s share price has fallen 37% since its high of USD120 in Jan 23. During this period, many US stocks have rallied or created a new all-time high.
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