Analysts are forecasting double-digit growth for this new Top Pick.
New Top Pick
Switch Baidu (BIDU) for Alibaba Group Holding Limited (BABA)
From Cabot Emerging Markets Investor
My original top pick for 2017 was Baidu (BIDU), the company that still dominates the Chinese internet search. But it’s beginning to look like Baidu is being left behind by nimbler, more innovative companies.
Accordingly, I’m switching my pick to Alibaba (BABA), a company that operates the biggest online marketplace in China and has its eye on being a major player in the global internet. With a market cap of $367 billion, Alibaba is already playing in a league with Amazon, the company it most resembles in scope and ambition.
Alibaba started as an eBay style marketplace, providing a platform for sellers and buyers to meet and providing secure payment services. But the company has used its growth—five years in a row with 20% revenue growth or better—to move aggressively into cloud computing, digital media and entertainment. Founder Jack Ma is a strategic thinker on a par with Jeff Bezos, and his drive to make Alibaba profitable has produced analysts’ estimates of earnings increases of 36% in 2017 and 71% in 2018.
Alibaba has used its free cash flow to make strategic investments and form joint ventures with companies that can widen its online footprint in China and move into international e-commerce, original video content and global data centers. Alibaba was founded in 1999, and Jack Ma says he wants it to last at least 102 years so it can thrive in three different centuries. He has the vision, the innovation initiatives and the cash to make that happen. It took BABA a long time to surpass its post-IPO high at 120, but that’s looking more and more like a very long base for further advances.
Paul Goodwin, Cabot Emerging Markets Investor, www.cabotwealth.com, 978-745-5532, July 6, 2017