Dividends and Alibaba is in Beijing’s bad books, is it worth another look?

In the stock market, we all know stocks go up and down, but sometimes they go up and down because of government actions. Governments tend to change over time and when they change, policies change and the negative affects of the government goes away which means stock prices can and often do go up. The concern is always timing, when does this happen?

In China the company which is the Amazon of China is Alibaba Group Holding Inc. For a number of years, Alibaba had the backing of the Chinese government and the company is large. Alibaba moved into fintech with a company called Ant Group Inc. however just before it was going to go public at valuations for a fintech company, state banks went to the government and said Alibaba which was taking business away from the state banks should be seen and regulated as a bank. The government agreed and the valuation of Ant went from $37 billion to half or $18.5 billion.

In an article be Ian McGugan, he suggests there are things to like about the stock. The revenue went up 64% to $28.6 billion. The company recently purchased the grocery supermarket chain Sun Art which helped push up sales. The company made $4 billion in profit up 18% in the year. The company had to pay a fine to the government, but it is a one time event.

The stock fell from $310 to $213 and trades at 26 times earnings.

Linking to dividend paying stocks, every company that is profitable eventually runs in concerns from the government. The government may think the company did or did not do something it should have. Investors have to ask what is the face saving solution for the government and the company. How long does it take to work through the year? When is a good time to either buy more or get in on a seemingly inexpensive stock? Just because there is opportunity it does not mean the opportunity to automatically make more happens overnight. How much time is needed?

There are more questions than answers, till the next time – to raising questions.

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