TGIF! September 19, 2014

Alibaba and the Fed. It sounds like a 1940s film, but that’s all anyone was talking about on Wall Street this week. I’ve been in NYC at an investment strategy session after visiting Alibaba’s management  team on their IPO roadshow.

The company is being billed as the Amazon of China, but it’s much bigger.  It’s a behemoth. Breaking it down, Alibaba is part Amazon, part eBay, part PayPal, with a splash of Google and and a pinch of Netflix.  It’s quite a cocktail.

IPOs are fascinating for a variety of reasons. Most importantly, they’re barometers for investor appetite for growth.  This one is particularly interesting because it’s a Chinese tech company. The holding company is domiciled in the Cayman Islands. That comes with guarded optimism. That said, it’s now the largest IPO ever.  To put in perspective how large it really is, BABA now has a larger Market Capitalization than 23 of the 30 DOW Stocks.  Many of these 23 companies have been around for over 40+ years! It began trading today on the NYSE. There was much more demand for the stock than supply.

Alibaba’s customer base is mostly in China.  There are currently over 600 Million Chinese users on the web (larger than the total U.S. Population) and by far the largest online population in the world, and growing.  China has a total population of 1.3 Billion.  900 Million live in rural areas, where mobile devices are popping up fast because landlines don’t exist. This brings new customers to the web virtually overnight. That is quite worthy of investment. Investing in China can be tricky.  Amazon and Google are watching very closely.

The Market celebrated the IPO and reveled in the Federal Reserve’s continued accommodation. Interest rates are staying low for a bit longer. There’s more runway for this Bull to run.

 By: Mike Frazier

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