BABA: Stock of the Week: Alibaba (BABA)

If you like Amazon…you’ll love Alibaba

In some ways, that’s probably all I need to write for this article. That’s because Alibaba (BABA) should be as much a cornerstone in most investor portfolios as Amazon or any other FANG stock.

However, it is shocking how many investors ran away from shares when the China trade dispute raised concerns about the Chinese economy. And with it BABA and their peers took it on the chin which keeps them well under their 52 week high.

Now with odds of a trade deal increasing…it is increasing the risk/reward prospects for Alibaba. And that is why the time to add it to your portfolio is now.

Not convinced?

Then here is the full roll call of reasons to add Alibaba to your portfolio ASAP:

Amazon of China. Not just the online retail aspect. But also growth areas like cloud computing. On top of that they have an exciting initiative called “New Retail” which is using big data to find a positive link between online and offline commerce.
27% expected annual earnings growth per year…and why it recently appeared in this article: 6 Sizzling Growth Stocks. The growth is borne of most of the goodness packed inside the bullet above. However, BABA want’s to be more than a one trick pony on China. So they are finding ways to expand beyond its borders to win market share in other geographies.
Time to put a toe back in the water with China stocks (as odds of a trade deal increase). And why it was featured in this other recent article: Are These 18 Chinese Growth Stocks Ready to Rally?
Riding a string of 5 straight earnings beats. This is an important turnaround after an extended period of weak in early 2018.
Momentum warming up with POWR Rating of B. Digging down into the component POWR Ratings we find a Trade Grade of A, Industry Rank of B and Peer Grade of B. That is a lot of momentum timeliness packed inside the stock at this time.
10% downside to $160 is the likely risk if the trade deal falls apart. This is the same level it fell to in early August the last time the trade deal hit a snag.
33% upside to $240 is the likely reward in the next 6-12 months if the deal is finalized and fears about Chinese growth blow away. Note that there are top analysts with targets even higher at $243 and $250.

Add it altogether and you can appreciate why now is a great time to add Alibaba for a timely trade. But long term investors should consider this a great entry point to store BABA in the back of their portfolio with pretty strong odds of years of outperformance to come.

Note that I recently added shares of BABA to the Reitmeister Total Return portfolio. To see all of my current recommendations (9 stocks & 3 ETFs), plus my market outlook, and next round of trades, then consider taking a 30 day trial to the Reitmeister Total Return portfolio.

BABA shares rose $0.31 (+0.18%) in premarket trading Wednesday. Year-to-date, BABA has gained 29.05%, versus a 23.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...