WATCH BEFORE INVESTING IN CHINA! ALIBABA, BAIDU, AND TENCENT STOCK! $BABA $BIDU $TCEHY

[vc_row][vc_column][vc_video link="https://www.youtube.com/watch?v=Ol3CSn_1cZQ"][/vc_column][/vc_row][vc_row][vc_column][vc_column_text][/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]hey everyone in this video we're going to be going over rules to follow when investing in china now this video is going to go over a lot of the risks and different things that i might not have went over too thoroughly in past videos with alibaba and baidu we haven't done a personal video on tencent but it's another big uh chinese company that people like to invest in now before getting into it smash the like button and subscribe to the channel if you haven't subscribed yet so the thing we need to talk about are basically these five things one is risk two allocation size three time horizon four who you should be betting on and five when and if you should cut your losses the first thing we need to go over is risk one reason that chinese stocks have been going down is there is a lot of basically regulation happening and this is basically this is true communism i'm going to read to you a small part of an article i was reading and then we'll go over it says since earlier this year chinese president xi jinping has described the nation's ever larger after-school tutoring industry as a chronic disease that has increased the cost of raising children and held down china's birth rate last week regulators ordered the tutoring firms to become non-profits and placed harsh restrictions on their business operations stocks and china's three largest online education providers already tumbling for most of the year shed two-thirds of their market value nearly overnight now this is straight communism the honest truth is basically the government said that this is not good for the general chinese public that the young people need this education uh and we're not talking about just like public schools we're talking about tutoring companies for tutoring kids after school and they basically said it is illegal to be a for-profit tutoring company just overnight like that boom no longer can you be a tutoring company now if you want to be a tutoring company you got to be a non-profit so what happened to companies that were public chinese stocks that were in the tutoring business well let's look at this one tal tal education group uh this stock is down 93.95 percent in the past six months it was already crashing during regulation and then it lost two-thirds of its value or whatever overnight on that rule this company was almost a 60 billion dollar company we're talking about a massive massive company it's now worth three billion dollars from 60 billion i mean you can see how devastating this regulation was to this company so in this case government intervention has basically killed this company they have to be a non-profit i mean that's basically what they said now this is a clear example of the risks involved when you invest in a chinese company based on these chinese regulations and government uh intervention that can happen at any minute now the bottom line of this was just to show that the chinese government it cares about protecting the people of china it does not care about profits for companies their interests are not about making investors wealthy so could things get worse the simple answer is yes it's important to understand that things could get worse some people commented that i did not go over risks as much in my alibaba video and that is why i feel it's important to go a little deeper in this video about these things so here are some of the things that can make things get worse one new regulations possible delisting two if growth slows or stops for the underlying business three if the net income continues to drop not just the revenue but if net income starts to drop even if revenue is going up four if the mergers and acquisitions continue to be blocked if the government doesn't let these companies acquire smaller companies and continue to expand and grow now if these things do not happen then like most things the only thing that can happen in my opinion to heal these companies after being beaten down is just time time will end up showing you know if if revenue continues to rise earnings continue to rise eventually investors will continue to jump back in and the stock should reflect the underlying business so it's just a matter of time now as far as allocation when investing i think it is important to set a max allocation it doesn't matter if your account size is a hundred dollars or a 10 million dollar account you have to have an allocation based on percentages that you go into an investment don't make this allocation as you go make it before you buy so first decide a percentage per stock or per sector so for example you know you could be deciding your allocation on alibaba stock or you could be deciding your allocation on chinese companies as a whole you don't want your account to have a too high of an allocation when there's high risk so that's the second thing higher risk means lower allocation in my opinion now the only reason people invest in high-risk companies is because they believe they're going to get a high return if you don't think you're going to get a high return you're not investing in a high-risk company so if you're going to get a high return if you turn out to be right there's no reason to put a large allocation of your account in it a small allocation will be able to make you plenty if you turn out to be correct but since it's high risk if you put a high allocation and you turn out to be wrong you will lose a lot and there's no reason to risk that much when the reward is so high anyways three dollar cost average down so whatever you decide your allocation to be do not buy it on day one you're better off to buy a small part of it and continue to add until you hit the top of your allocation as the stock continues to drop if it is dropping and if it goes higher if it's still beneath what you believe the true value is you can dollar cost average up and down as long as it is under what you think the true value is so what is a good allocation size well this is something that's very different for everyone based on their risk tolerance i think that conviction is basically plays the largest role in how you decide what your allocation is going to be the higher your conviction the higher your allocation could be for me as i believe that there's a lot of risk in the chinese sector as an entire whole the entire chinese sector i gave myself a 10 max position across all chinese companies now that does not mean i'm at ten percent today i'm actually far below that i'm about closer to four percent or so but if it continues to go down earnings continue to go up i wouldn't mind continuing to add and i set a max at 10 across all chinese companies i probably will never get to that 10 because i think even that is a little too high but it's important to set a limit for yourself now i have been guilty of over allocating when my conviction was extremely high and i felt that the risk was low and the reward was high then i over allocated for example when tesla was a 30 billion dollar company it was doing about 20 25 billion in revenue for the year it was growing revenue at 50 per year year over year i basically went all in to be honest now did it work out yes was it something i'd recommend others to do no the issue is when you over allocate like going all in and things like that even if it worked out nine out of ten times the tenth time you basically get destroyed so you should not do it unless you really can afford to lose all that money and you really have an extreme high conviction and even in that case it's just no reason to go all in you don't need to take the risk now time horizon this i think is extremely extremely important on investing in risky companies because you have to be able to sit this out so if you plan to invest in chinese companies do so with a long time horizon if you need to access this money that you're investing for expenses or something in the near future i don't think it's something you should invest in a chinese company then my time horizon is five years when thinking about these chinese companies if you can't hold it for the long run stick to less risky stocks or maybe don't even have it in stocks have it somewhere else if you need to access this money soon now the next thing is who to bet on many chinese companies are going down the question is which one should you buy in my opinion you should stick to the big three that means alibaba group baidu and tencent these three companies of all chinese companies are the ones i prefer to invest in i do not want to be investing in small chinese companies that basically uh have a higher chance in my opinion to get de-listed that the numbers would have a higher chance of basically being fraudulent or different things i'm not accusing any specific companies of it but if i'm going to invest in a foreign company especially a foreign chinese company i want to bet on the big three now the real question you have to ask yourself is when all of these chinese companies are on discount why buy anything else but the best of the best they have massive growth they are printing cash they're already extremely profitable they have diversified revenue streams and they are trading for cheap valuations there is no reason you would want there's nothing better like in these smaller stocks they're not growing much faster or anything like that there are massive growth even at these huge valuations for alibaba tencent and baidu so of these three companies which are the best in my opinion alibaba is the top pick after alibaba i like baidu and i like tencent equally i think that they present different types of values now if i had to pick one like i said i'd pick alibaba if you wanted to invest in all three the way i would split it is i'd go half alibaba a quarter by do a quarter ten cent now when do you cut losses this is extremely important it's probably the most important piece i have made more money by cutting my losses quick when things start to change on my thesis than being right it is important to cut your losses quick when you know you're wrong a great investor constantly questions themselves and is ready to change positions the moment they identify a flaw or a crack in the thesis now i can name many great investments that do not have the risk that these chinese companies have so you should not stay in a stock just because it's cheap or just because you've lost a certain amount of money and think you need to just hold it because you're already down so much those are not reasons to hold a stock if the revenue growth stops if the earnings continue to drop if the business begins to have serious effects from government intervention i will cut my loss and move on to the next investment now unfortunately since we have to wait every three months to get a basically report the earnings report on the business and see how it's doing a lot can happen in those three months so because of all this regulation going on so for this case i'm going to be watching for new regulation if the regulation has some serious effect on the ability for these companies to make profits then i will cut my loss if i don't see that it's going to have that much of an effect or i'm not 100 sure i'm going to wait for the earnings i'm going to see them and i'm going to give them a fair chance if the earnings continue to be good i'll continue to add if the stock is trading lower if the earnings start to get affected i have to be ready to cut a loss if the overall thesis gets cracked so yes i am bullish on china's future that said i do think it's important to show how something that looks good can end up bad alibaba currently has massive growth and it trades at a p of just under 20 i believe if the government intervention does not stop them from collecting revenue let's say it has the same revenue or grows a little but it does stop how much it's the bottom line their net income let's say they're forcing them to pay employees higher wages let's say that they are telling them because of unfair monopoly type of practices they can't do this they can't do that and the net income becomes less their pe could easily go from 20 to 30 if they have less earnings now if something like that was to happen the question becomes why invest in this chinese company that has all these possible risks with regulation and communism over it when you could have a u.s big tech company trading at a 30 p as well it is no longer going to be a cheaper price to earnings so it becomes the value kind of disappears in it and then there's no reason to be in it when you could be in a u.s big tech company that has equal growth with uh less risk at a same valuation so that is why we have to be very diligent on what we're doing in our investments now in summary one there are many risks you have to be aware of them two only allocate a small portion when investing in risky companies three have a long time horizon four bet on the best of the best and five cut losses if the thesis cracks personally i have less than five percent of my total portfolio invested in chinese companies upon future earning reports i'm ready to increase that allocation if things seem to become better and i'm also ready to sell it completely if things continue to get worse a good investor has to be ready to do either or now some final updates i want to give you on some basic news i looked into first is that al gore's investment firm made a big bet in alibaba second is that tencent says more regulation is set to come third beijing is taking a stake in bike dance also in weibo and fourth china is signaling more regulation for businesses in the coming years thank you for watching if you like this video please give it a like if you haven't subscribed definitely subscribe i'm just looking to update everyone on these situations i still am a bullish investor in chinese companies but i do have serious concerns and i think it is important to acknowledge them everyone until next time i appreciate your support and i read all your comments lastly if you haven't seen we are doing a giveaway at 2 000 subscribers so definitely check out that video and definitely enter to win<br><!-- wp:image {"id":1776,"sizeSlug":"large","linkDestination":"none"} -->rn<figure class="wp-block-image size-large"><img class="wp-image-1776" src="https://en.videoencontexto.com/wp-content/uploads/2021/10/WATCH_BEFORE_INVESTING_IN_CHINA_ALIBABA_BAIDU_AND_TENCENT_STOCK_BABA_BIDU_TCEHY_Ol3CSn_1cZQ.jpg" alt="WATCH BEFORE INVESTING IN CHINA! ALIBABA, BAIDU, AND TENCENT STOCK! $BABA $BIDU $TCEHY" /></figure>rn<!-- /wp:image -->[/vc_column_text][/vc_column][/vc_row]

WATCH BEFORE INVESTING IN CHINA! ALIBABA, BAIDU, AND TENCENT STOCK! $BABA $BIDU $TCEHY

Share

Comments (0)

Post a comment