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#0 (old) - DeBABAcle

Publish date: Nov 20, 2021
Last updated: Aug 4, 2023

$BABA have released their earnings, and the market didn’t like them. I didn’t look into the details of it, but basically growth and margin have slowed down in their core commerce business due to competitive pressures. Cloud is growing nicely, but not much impact on the bottom-line yet.

A few days prior, we learned that Pabrai had sold the majority of his stake. This had a liberating effect on me: I wondered “Why am I in this position to begin with?”.

My initial thesis was that of a shameless cloner: how could Munger and Pabrai be wrong? I now realize that like a teenage fanboy, I took pride in being invested alongside these two legends.

What I failed to consider back then is that my situation is not the same as theirs. More specifically, my capital is orders of magnitude smaller. Which means, I can play in areas they can’t. I can look for tiny companies that not many are looking at, and I can buy decent businesses at very cheap valuations. And I have.

I’d like to think my skills have improved significantly since my initial purchase of $BABA shares and with it, my universe of available choices. And I’m finding many more good and easy investment opportunities than I was just 3 months ago. I think I am a better hunter today, and a stock like $BABA is not that attractive of a target to me now. It’s just not wasy enough.

All of this thinking was unlocked in my brain when I saw that Pabra sold. In a way, he gave me permission to get away from this exhausting chase. I sold my entire stake in my taxable account, at a loss, and only kept what’s in my non-taxable account, a much smaller position that I’m OK keeping for longer.

Since then, I’ve seen several thread on twitter arguing that $BABA is still a good investment, such as this one:

Even worse, posters that brag about their mental fortitude, being able to withstand big drawdowns. [The user (same as above) deleted their tweet.]

To which my reaction is: why bother? Why bother with a complicated investment in a complicated business and a complicated country? There are easier ways to make money. It’s not like you have a shot at a 100-bagger here, so is it really worth it…

In the end, we’re not just trying to compound our money. We’re compounding our energy. Spending mental juice trying to justify this position seems wasteful to me. This is NOT a 2000-era Amazon situation. This is a mature business facing competition from every angle and fighting off a voracious and dictatorial government.

Now you might argue that I just don’t have the stomach for this game. Maybe. I think I simply realized I was wrong, and looking forward, I could find much better places to park my money, ones where I could acquire deeper understanding and conviction about the business prospects.

In retrospect, shameless cloning, if it simply means copying the decisions of someone else, is idiotic. We have to understand the “why”, and then we have to ask:

  1. “Does it apply to my situation?”.
  2. “Is this one of the best ideas I can find right now?”

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