Exit Strategies for Alibaba | The Investment Quadrant by The Fifth Person

Questions › Category: Exit Strategies › Exit Strategies for Alibaba

Chit Yan asked 12 months ago

I have been investing alibaba for around 2 years. My average bought in price for alibaba is around $145.00. I do not see any potential growth in alibaba to rise the stock back in value to $200++ anymore. What is your recommendation for exit strategies given the price is at $82.00 now.

3 Answers

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Victor Chng answered 12 months ago

Hi Chit Yan, What was your original thesis when you bought Alibaba?

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Chit Yan answered 12 months ago

I like the fundamental and potential outlook when i first bought Alibaba. But i think the stock is overpriced when i first purchased and kinda regretted it now.

Victor Chng replied 12 months ago

Hi Chit Yan,

I would need to understand more about your reasons when you purchase Alibaba. I am not licensed to give financial advice, but I can point you in the right direction if I understand your rationale and situation more clearly. Help me answer these questions:

1. When you say overpriced, are you basing it on valuation or share price?

2. If based on valuation, how did you value it before your first purchase and what is your intrinsic value of Alibaba

3. Have your view of the fundamental and potential outlook change since your first purchase?

4. Does holding on to Alibaba affect you emotionally?

Chit Yan replied 12 months ago

When i first started investing, i did not really do much of a homework and bought into alibaba based on the share price without calculating the intrinsic value. I invested on BABA back in 2021 and currently i feel the potential growth are limited in future. It does not emotionally affecting me because i still have other stocks in my portfolio but i just feel that it maybe worthwhile to reinvest the money elsewhere for a better growth stocks.

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Victor Chng answered 12 months ago

Hi Chit Yan, Based on your reply, I can understand your thinking about Alibaba. If I am in a similar position as you, I will usually rotate out from the stock and reinvest somewhere. The reason why I do that, even if I am making a loss, is as follows:

Since the potential is limited, I don't want to waste time holding on to the company. There is an opportunity cost to it.
Holding on to something I have lost conviction does not help me mentally, as I will keep thinking about the stock at the back of my mind. In this case, I want peace of mind to focus on better opportunities.

I hope this helps