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Alibaba Group Holding Ltd (BABA), A Great Capitalistic Success Story From A Communist Country: Keith McCullough

Alibaba Group Holding Ltd (NYSE:BABA) is a tale of twists and turns and its stock price is just one evidence of that and this is what American investors bought into, the saga of Alibaba and its resounding reinforcement of American culture of capitalism, and not the valuation of the business. CEO of Hedgeye Risk Management, Keith McCullough and CIO of Beaconcrest Capital Management, Kevin Divney discussed the phenomenon called Alibaba, or in other words the ‘American Dream’, on Fox Business with Maria Bartiromo. 1

The fact of the matter is, as Bartiromo pointed out, nobody who bought Alibaba Group Holding Ltd (NYSE:BABA)’s stock post- IPO is in the positive right now. Alibaba’s stock price when the stock started trading was $94.5 and it is now trading at $89.5. How could the American investors have it so wrong?

When Keith was asked to poke holes in the seemingly perfect e-commerce business story of Alibaba Group Holding Ltd (NYSE:BABA), by Bartiromo, he explained that there are a lot of factors to consider other than the Forest Gump style story of Jack Ma, Alibaba’s CEO, and his company.

“[..] You got to look at the valuation, you got to look at the operating history, and sometimes when companies are brought to market by accident they happen to have perfect financials at that moment and I think that a lot of investors see through that […],” said McCullough.

Divney added to this line of thought and said that Alibaba Group Holding Ltd (NYSE:BABA) has a F-1 which is 500 pages long and he doubted that even 1% of Alibaba Group Holding Ltd (NYSE:BABA) enthusiasts read one page of that report.

Keith put a perfectly sized lid on the Alibaba Group Holding Ltd (NYSE:BABA) story when he said that people bought into the China factor which led them to make a prejudiced decision that every company from China means exceptional growth. To top it all, Jack Ma’s ‘from rags to riches’ story made them want to own a portion of this ‘great capitalistic story from a communist country’ in Keith’s words.

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