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Harding Loevner: “Alibaba (BABA) was “Poking the Dragon” of Politically Powerful, Vested Interests”

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Jose Karlo Mari Tottoc
·3 min read
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Harding Loevner, an investment management firm, published its “International Equity” fourth quarter 2020 investor letter – a copy of which can be downloaded here. A net return of 16.28% was recorded by the fund in the fourth quarter of 2020, trailing its MSCI All Country World Ex-US benchmark that delivered a 17.08% return but above its MSCI EAFE Index that had a gain of 16.09% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Harding Loevner, in their Q4 2020 investor letter, mentioned Alibaba Group Holding Limited (NYSE: BABA) and shared their insights on the company. Alibaba Group Holding Limited is a Hangzhou, China-based e-commerce company that currently has a $611.9 billion market capitalization. Since the beginning of the year, BABA delivered a -2.58% return, impressively extending its 12-month gains to 20.88%. As of March 31, 2021, the stock closed at $226.73 per share.

Here is what Harding Loevner has to say about Alibaba Group Holding Limited in their Q4 2020 investor letter:

"Good returns from Brazil and India countered weakness in China, where investors digested the implications of Alibaba's withdrawal of its planned IPO for its Ant Financial affiliate under pressure from banking regulators, and the parent company later was put on notice about the potentially anticompetitive practices of its core e-commerce business.

Consumer Discretionary was the biggest drag on our full-year performance, due to our underweights in autos and retailing and the end-of-year struggles of Alibaba.

In China, where Alibaba dominate the previously largely freewheeling consumer economy, the situation is more treacherous, if only because of the opaque and unconstrained nature of China's regulatory authority. By encroaching onto the turf of the state-supported Chinese banking system via their payments platforms, Alibaba was "poking the dragon" of politically powerful, entrenched vested interests, and potentially getting their business models signed in the process."

Alibaba Group Holding Ltd (NYSE:BABA), Booth of Alibaba Group, IT tradew show, website, group, chinese
Alibaba Group Holding Ltd (NYSE:BABA), Booth of Alibaba Group, IT tradew show, website, group, chinese

Pieter Beens / Shutterstock.com

Our calculations show that Alibaba Group Holding Limited (NYSE: BABA) ranks 7th in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Alibaba Group Holding Limited was in 156 hedge fund portfolios, compared to 166 funds in the third quarter. BABA delivered a -4.89% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.