Since late 2016, my retirement account has made $15,000 on Alibaba (NYSE:BABA) stock.
According to my bookie Charles Schwab (NYSE:SCHW), I bet $20,000 on Alibaba in 2016. I cashed out for a profit of $13,000, then put $17,500 more in. I’m about $2,500 ahead on that.
During these four years Alibaba has gone from being a speculative China play to a leading cloud-and-commerce player. It has more invested in stores than Amazon (NASDAQ:AMZN). It goes toe-to-toe with Microsoft (NASDAQ:MSFT) in the Asian cloud market.
Alibaba is in the news lately because co-founder Joe Tsai, who now owns the Brooklyn Nets, donated tons of protective gear and ventilators to New York’s fight against the novel coronavirus. It’s just one of many pandemic donations the company, and the Jack Ma Foundation, have made around the world.
The donations illustrate Alibaba’s evolution, and China’s. Alibaba stock is a hot one to watch.
The Alibaba Story
Alibaba was founded in 1999 as a business-to-business company. Its aim was to make small Chinese producers competitive in large Chinese markets. Now it can do the same thing for American businesses. This includes financing.
Alibaba has an all-embracing strategy that is part Visa (NYSE:V), part Salesforce (NYSE:CRM), part Walmart (NYSE:WMT) and only part Amazon. While U.S. companies specialize in software, banking or commerce, Alibaba seeks to do it all, whether you’re a business or consumer.
Under Daniel Zhang, an accountant who became CEO in 2015, Alibaba created “new retail.” This is a seamless combination of online and offline shopping. Alibaba now has about 60% of China’s e-commerce market.
In the cloud, Alibaba offers a full application suite, not just infrastructure and not just a platform. It also backs startups, some of which are emerging as stars.
In finance, Ant Financial, which runs the Alipay mobile payment network, is worth $150 billion. It has agreements with 170,000 North American retailers.
Alibaba Stock Today
Alibaba stock is no longer just a China play. It is a global competitor with a global presence and global ambitions. But it’s still Chinese.
Co-founder Ma, who retired last year, told reporters in 2014 he liked Forrest Gump. But he’s more like Andrew Carnegie, a ruthless businessman who nevertheless sees money as a responsibility. He has been a member of the Chinese Communist party all his adult life but is a modernist, not a Maoist.
Alibaba went public in New York first because U.S. laws allow dual-share ownership. It took a second listing in Hong Kong after dual-share structures were allowed there. Dual-share structures are still prohibited in China, so Chinese investors must convert yuan to either Hong Kong or U.S. dollars to get in to Alibaba stock.
The Bottom Line on Alibaba’s Dominance
Competition makes everyone better.
Alibaba is the greatest competitive threat American businesses have faced since the Web was spun.
This is a good thing. Alibaba will make American companies stronger. If they understand that it’s going after all of them, and if they rise to meet the challenge.
Meanwhile, American investors can make money from both sides. In addition to Alibaba stock, I own shares in Amazon, in Microsoft and in Apple (NASDAQ:AAPL), which straddles both sides. These companies should be at the heart of any modern portfolio.
Internet stocks have held up well during the crisis. The productivity they create and the deflation they enable are why the dollar index remains at about 100.
Alibaba stock has given China’s economy the same benefits we enjoy. But it’s not the end of the world. It’s just the start.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BABA, AMZN, MSFT and AAPL.