Someone recently asked me would I consider investing in Alibaba or Tesla now that their stock prices are down so much.
Of course, for long-time readers of my blog, it’s probably easy to guess my answer.
Singapore has enough opportunities for me and investing in Singapore suits my goal.
I’m also at the age where I’m less interested in excitement and more interested in stability.
Yes, the AKP is a big guy, as PM Lee put it.
However, from time to time, the mind forgets the age of the body.
So, I bought into the Hang Seng Tech ETF a few years ago and blogged about it as well.
I was very clear that I was trading the ETF because the ETF did not pay dividends.
After a few rounds of trading, my current small position is at such a low price that I agree to hold it as a speculative position.
Naturally, by sticking with the ETF, I have exposure to Alibaba as well.
To be completely honest, if I had to choose, I would invest in Alibaba and not Tesla.
From a valuation perspective, well, from a traditional valuation perspective, Alibaba is fairly overvalued and some would say undervalued.
It’s very easy to make a case for investing in Alibaba now if not for the political risks in China.
As for Tesla, I blogged about it a year ago when its stock price fell 10% to $163 per share in one day.
At the time, Tesla was trading at a PE ratio of about 45x even after the price decline.
For me, it wasn’t mouth watering but it was eye watering.
I said at the time that if Tesla was the growth company people said it was, maybe a 45x PE ratio would be acceptable.
However, at a PE ratio of 45x, Tesla would have to grow its dividend by 45% annually to have a PEG ratio of 1x that would make it fair value.
To be fair, when looking at industry peers, a P/E ratio of 1.5x might make more sense meaning Tesla would have to grow at 30% per year to make a P/E ratio of 45x acceptable.
Was Tesla increasing its profits by 30% per year? no.
At the time, I said the most reasonable price for the stock would be around $80 per share.
With its stock price now sitting at $147, much lower than it was a year ago, it’s possible the market is slowly waking up to reality.
Alibaba may have to face political risks, but Tesla faces personal risks, among many others.
Personal risk?
The strange and arrogant Elon Musk.
I remember someone asked him about BYD a few years ago in an interview and if he was interested in competing.
Elon laughed and said, “Have you seen their cars?”
Well, who’s laughing now?
If AK can laugh at himself, you can too.
Related post:
Tesla results and evaluation.