Most investors regard Alibaba Group Holding Ltd (NYSE:BABA) as the leading e-commerce company in China. And many consider it great because of its equally great and well-known leader, Jack Ma. Both of those statements are 100% true, but neither represents BABA’s single most important and, in my opinion, attractive quality.
I have been a big fan of BABA for some time now, and it really boils down to the fact that this is not a company that is solely focused on e-commerce. It actually has its tentacles in countless other businesses.
I could write endless pages on this topic, but for the sake of my fingers typing away on the keyboard let’s just focus on just the last few weeks. In that very short period of time, Alibaba has invested more than $1 billion in two Chinese companies that are also leaders in their respective industries.
The first is in ZTO Express (Cayman) Inc (ADR) (NYSE:ZTO), a Chinese logistics firm that trades on the New York Stock Exchange. BABA’s $1.38 billion investment bought it 10% ownership of the booming business and helped expand a mutually beneficial partnership.
Alibaba also invested several hundred million dollars into SenseTime, which is a Chinese artificial intelligence (AI) company. The AI market is still in its early stages, but I believe it has the potential to create some of the world’s largest companies in the decades ahead.
In fact, based on SenseTime’s $4.5 billion valuation, which it recently achieved following a round of funding that included a group of big-name venture capitalists, the company is currently the largest AI firm in the world.
Now remember, those two investments are just what BABA has been involved in within the last few weeks. The numbers of companies it owns a sizable portion of is large, and its reach puts it in more than 200 countries around the world.
A few other important companies that fall under the BABA ownership umbrella include Taobao, which is China’s version of eBay Inc (NASDAQ:EBAY); Lazada, an e-commerce company that focuses on Southeast Asia; and Ant Financial Services Group, which is the world’s largest online payment company with over 400 million users.
In fact, Ant Financial recently raised an additional $10 billion at a $150 billion valuation to make it the most valuable financial technology company in the world.
BABA’s core e-commerce business is a great reason in and of itself to own the stock. But when you add in the ancillary businesses that have the potential to be worth over $100 billion on their own, you’re left with a company that is truly leading the world into the next generation. Eventually, this stock will boast a valuation over $1 trillion.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.
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