Do you have a problem with where to put your cash to work? Then look no further than Alibaba Group (NYSE:BABA). With solid supports off and on the price chart, the trade war in Alibaba stock is handing investors a unique path to victory and big-time profits. Let me explain.
Monday’s headlines are busy promoting well-received elections inside Hong Kong as a source of support for Asian markets. Voters ushered in a blue wave of pro-democracy officials to power. To be sure, the victories are a certain bullish driver for overseas markets and China’s Alibaba stock.
But what will tomorrow bring? Investors need look no further than a prolonged game of political chess between the U.S. and China to appreciate today’s cheers could turn into tomorrow’s jeers just as quickly. But buying BABA stock today is one investment that has much more going for it.
BABA Adds a Hong Kong Listing
Alibaba stock’s recent $11.2 billion share sale has led to the sprawling tech giant being listed in both Hong Kong and New York. Moreover, within a universe of publicly-traded, non-financial companies, only Apple (NASDAQ:AAPL) is sitting on a more significant war chest of cash. The completion of the dual-listing has resulted in a $43 billion cash trove for BABA versus AAPL stock’s $49 billion.
What will Alibaba Group ultimately do with all those Benjamins? The least likely decision would be for the company to stand pat. Historically-low interest rates make sitting on cash a prohibitive course of action at best. Far more likely, Alibaba stock will continue to invest in acquisitions.
Bottom-line and despite the associated costs and squeeze on margins, Alibaba will undoubtedly continue to grow its diverse businesses to compete against companies ranging from Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL), to Microsoft (NASDAQ:MSFT) and Walmart (NYSE:WMT). Alibaba is no stranger to this course of action and has proven incredibly successful at investing in itself.
Another avenue for funneling Alibaba’s funds could be into stock buybacks. One need only look back at AAPL stock, its cash position, and own strategic buybacks, which have ultimately enriched shareholders. There’s another big benefit of an Alibaba stock buyback which deserves consideration too.
By issuing a buyback on NYSE-listed Alibaba stock, management can reduce its overseas float and grow its investor base closer to China. And let’s face it, if for no other reason, and given this day and age of MAGA and other xenophobia, can you blame Alibaba stock for using its Hong Kong listing towards this end?
Alibaba Stock Monthly Chart
Technically speaking, the good news for today’s investors is that Alibaba stock holds a certain ace. A sturdy monthly chart triangle which was narrowly broken to the upside a couple weeks ago just received additional bullish confirmation in Monday’s session with shares breaking out of a small lateral consolidation.
The price action increases the odds the breakout from the large triangle is from a continuation pattern. If correct, this could lead to an equal size leg higher to match BABA’s rally of approximately 200% from early 2016 into mid-2018.
Conservatively, a similar measured move could see a rally towards $275 – $300 in 2020. And with Alibaba stock’s stochastics trending higher in neutral territory supporting that forecast, buying shares today makes increasing sense off and on the price chart.
Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits