Davis Funds, an investment management firm, published its “Davis Global Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. For the first seven months of 2021, Davis Global Fund returned 0.40%, underperforming the MSCI ACWI (All Country World Index) return of 13.08% by −12.68%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Davis Global Fund, in its Q3 2021 investor letter, mentioned Alibaba Group Holding Limited (NYSE: BABA) and discussed its stance on the firm. Alibaba Group Holding Limited is a Hangzhou, China-based e-commerce company with a $348.1 billion market capitalization. BABA delivered a -47.58% return since the beginning of the year, while its 12-month returns are down by -54.35%. The stock closed at $122.00 per share on December 02, 2021.
Here is what Davis Global Fund has to say about Alibaba Group Holding Limited in its Q3 2021 investor letter:
“The Chinese government has also clearly communicated what its long-term goals are. In 2015, the government proclaimed the Made in China 2025 strategy, which was a policy roadmap to transform the Chinese economy from a powerhouse in labor-intensive industries into a powerhouse of technology-intensive products and services. Industries specifically targeted for leadership positions include information technology, artificial intelligence, robotics, new materials, biotechnology, aerospace and renewable energy. Many of our holdings, including Alibaba Group are leaders in many of these fields and are key to achieving China’s goal of becoming a modern 21st century economy. Their entrepreneurial management teams and talented workforce are driven by the profit motives of private enterprise, and these knowledge-intensive industries are key to their companies’ success. As such, we believe the ongoing technology industry antitrust review is designed to strengthen the industry, rather than weaken or nationalize it.
Alibaba Group was the first company to undergo the antitrust review and after a three-month investigation, was fined $2.8 billion to punish it for non-competitive behavior. The government specifically mentioned its exclusive supplier contracts colloquially known as “choose one from two” as behavior harming customers and competitors. It is our expectation that Alibaba Group will be the most heavily fined company, given it had the most aggressive business tactics. While $2.8 billion, equivalent to 4% of Alibaba Group’s 2019 domestic revenues, is almost three times the previous record $975 million antimonopoly fine levied against Qualcomm in 2015, it is also much lower than the legal 10% of revenues that could have been assessed. $2.8 billion is also an amount that the company can easily weather, given it is also only 4% of the cash on Alibaba Group’s balance sheet. While the government clearly wanted to punish the company for noncompetitive behavior, it also seems that its goal was not to permanently damage the company, but rather set clear standardized regulations for the entire industry.”
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Based on our calculations, Alibaba Group Holding Limited (NYSE: BABA) ranks 13th in our list of the 30 Most Popular Stocks Among Hedge Funds. BABA was in 115 hedge fund portfolios at the end of the third quarter of 2021, compared to 146 funds in the previous quarter. Alibaba Group Holding Limited (NYSE: BABA) delivered a -28.36% return in the past 3 months.
Disclosure: None. This article is originally published at Insider Monkey.
