We recently published a list of Jim Cramer’s Latest Portfolio: Top 10 Stocks in July. Since Alibaba Group Holding Ltd – ADR (NYSE:BABA) ranks 3rd on the list, it deserves a deeper look.
Jim Cramer in a fresh episode of “Mad Money” on CNBC said that while investing isn’t easy, it’s made even more difficult by “authentic Wall Street gibberish” and “arcane technology.” Cramer said that there’s an “entire industry” in Wall Street wanting people to think that investing is hard and “ordinary people” cannot do it on their own. Cramer said that many people in the financial industry are just “after your fees” and they aren’t interested in making money from original investing. Cramer said that hedge fund managers and mutual funds make investing look inaccessible and impenetrable.
Cramer said that he’s “pulling back the curtain” and emphasized that investing isn’t “rocket science” or “brain surgery” and you don’t need to go to a business school to understand it. Cramer pitched himself as a “coach” or a “translator” who can explain the meaning of complex financial terms to ordinary people.
“You can comprehend all the mystical-sounding vocabulary we throw around here as long as you have a translator, a coach like me, who can explain what the darn words mean.”
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s talking about. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Christopher Penler / Shutterstock.com
Alibaba Group Holding Ltd – ADR (NYSE:BABA)
Number of Hedge Fund Investors: 103
Jim Cramer in a recent program yet again reiterated his claim that Alibaba Group Holding Ltd – ADR (NYSE:BABA) is the “cheapest stock in the world.” Cramer said that David Tepper, “one of the greatest investors, believes this too.”
Cramer recommended investors to hold on to Alibaba Group Holding Ltd – ADR (NYSE:BABA).
“I am not being aggressive, but you have to hold.”
UBS is bullish on Alibaba Group Holding Ltd’s (NYSE:BABA) exposure to AI because of Alibaba Cloud, or Alibaba Cloud, which makes the Chinese company a formidable player in the AI enabling layer. In the intelligence layer, UBS highlighted Alibaba Group Holding Ltd’s (NYSE:BABA) Qwen large language model, while the Qwen agent makes the company’s presence notable in the application layer.
However, uncertainties in China and Alibaba Group Holding Ltd’s (NYSE:BABA) lackluster performance have damaged the sentiment around the stock. While Alibaba Cloud is a significant player in the market, analysts believe enormous growth and advancements of Alphabet, Amazon and Microsoft in the public Cloud markets have left Alibaba Group Holding Ltd (NYSE:BABA) behind. Wall Street analysts expect Alibaba earnings to grow at a CAGR of just 1.7% only over the next five years. Alibaba Group Holding Ltd’s (NYSE:BABA) forward PEG ratio is 3.29, which is high when we incorporate the unimpressive earnings growth expectations.
Alibaba Group Holding Ltd’s (NYSE:BABA) ecommerce business is also struggling as buyers in China become price-conscious amid a broader slowdown. However, Alibaba Group Holding Ltd (NYSE:BABA) bulls believe the stock could rebound if the situation improves in the country, given the company’s massive cash flow position. Alibaba Group Holding Ltd (NYSE:BABA) finished fiscal 2024 with a whopping $34.37 billion in cash on hand, with another $36.42 billion in short-term investments.
In May, Baidu analyst Colin Sebastian said in a note after Alibaba Group Holding Ltd’s (NYSE:BABA) quarterly results that the company was gaining “early momentum” as it changes its priorities.
“Alibaba is focused on recapturing e-commerce market share in China, and capitalizing on momentum in international commerce and cloud computing building on strong growth in cross-border volumes, and accelerating revenues in public cloud,” the analyst said.
Sebastian has an Outperform rating on the stock and an $85 price target.
Artisan Select Equity Fund stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its first quarter 2024 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) shares declined 7% during the quarter. There isn’t much new to say about Alibaba. There was no meaningful news that drove the share price decline. The earnings for the December quarter were fine, with revenues and profits both increasing 5%—not typically an exciting level of growth, but certainly enough to justify the company’s paltry valuation of 4X–5X EBIT. As we have written in recent letters, this is a valuation level that is normally reserved for a dying business, and Alibaba is not a dying business. Management continues to implement changes that are intended to increase shareholder value. Over the past year, they have changed management, adjusted the company structure, contemplated spinning off assets, made progress monetizing the balance sheet and have improved the capital allocation. All of these actions have yet to be reflected at all in the share price. This is a stock that could double and would still be cheap.”
Overall, Alibaba Group Holding Ltd – ADR (NYSE:BABA) ranks 3rd on Insider Monkey’s list titled Jim Cramer’s Latest Portfolio: Top 10 Stocks in July. While we acknowledge the potential of Alibaba Group Holding Ltd – ADR (NYSE:BABA), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Alibaba Group Holding Ltd – ADR (NYSE:BABA) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
