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Australian Investment Blog

Asia 20/09/2018

International Stocks to buy – an Asian focus


Baidu, Alibaba,  Tencent & Samsung


Baidu (BIDU) $US216.88

Baidu is China’s most popular search engine which is now moving into artificial intelligence and self-drive cars. Not surprisingly its often referred to as China’s Google. An internet dream story that was founded in Beijing hotel room in the year 2000. Baidu's main revenue comes from advertising, similar to Google AdWords and it already generates more revenue than Netflix or eBay. However like others Baidu is vulnerable to China’s strict online censorship laws making the future a bit opaque but with only ~50% of the Chinese population on Baidu growth should continue, especially with Google banned in China. Either buy at current levels with stops below 190, or buy / add into fresh highs above $US300 with stops below $US280. Baidu (BIDU) US Chart

Alibaba (BABA) $US156.55

Alibaba (BABA) is a Chinese internet behemoth that combines internet and artificial intelligence which last month announced they had grown revenue over 60% on a year on year basis and free cash flow over 400% in just 4-years – clearly some big numbers. We like BABA given it provides direct exposure to the Chinese middle class, a huge growing demographic with increasing purchasing power -  a thematic we believe in at MM. Trade war fears have taken down Alibaba shares plus the looming retirement of founder Jack Ma to focus on philanthropy. MM regards the recent ~27% pullback as an excellent accumulation opportunity in this high quality business on a reasonable valuation. Alibaba (BABA) US Chart

Tencent (700HK) HKD318

In August, Tencent’s profit fell for the first time in 30-years sending the stock down 6% raising the obvious question, has it become ex-growth. Chinese regulators becoming more involved in the growing gaming industry has concerned many, especially their order of Tencent to stop selling the popular game “Monster Hunter World” – we wonder if these headwinds might become tailwinds in a trade war as the Chinese government would look to support their own! At MM we believe the current 35% pullback is an opportunity to start accumulating Tencent into weakness. Tencent (700 HK) HKD Chart

Samsung Electronics (005930 KS) KRW45,500

Samsung has been a pretty poor performer amongst the global techs this year falling well over 20% from its late 2017 highs. The South Korean household name suffered from a slowing / more competitive smartphone market plus serious worries over memory and semiconductor prices. The semiconductor division is actually the companies talisman contributing to almost 80% of profits hence margin concerns here are a very real issue. Our view is that these issues plus general selling of Asian tech names is providing a buying opportunity in the stock which is trading on an extremely low valuation compared to its global peers. MM likes Samsung at today’s prices Samsung Electronics (005930 KS) KRW Chart

Market Matters Take/Outlook

We like Samsung, Tencent & Alibaba while neutral to positive on Baidu.

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