Profit Pregame

China’s Monopoly Crackdown Drops Alibaba Stock

Chinese regulators revealed an investigation into alleged monopolistic practices from one of China’s biggest retailers, Alibaba Group Holding Limited (BABA).

What’s happening?

On Thursday, news broke that the Chinese government is investigating potential antitrust violations regarding Alibaba’s “choose on of two,” which requires business partners to avoid dealing with competitors.

BABA has seemingly had a target on its back recently, as the Chinese government also took steps last month to hinder the IPO of Ant Group, a financial platform that was spun off from Alibaba.

With the Chinese communist party looking to rein in the influence of mega-tech companies, while similar antitrust efforts being made here in the U.S., this may not be the last roadblock BABA encounters.

Where’s the money?

With such huge implications for the online retail industry, one might be tempted to short not only BABA, but similar Chinese retail platforms like Tencent Holdings Limited (TCEHY) and JD.com (JD).

BABA continues to look weak as the Chinese government continues to take measures that devastate its share price. The recent troubles BABA has had with the Chinese government highlights my biggest issue with Chinese stocks. Their geopolitical environment is simply not as safe for businesses as here in the U.S.

However, the massive success of Alibaba, combined with the continued growth of the Chinese middle class which it serves, should not be over looked…

How do I get some?

Despite the pain BABA stock has felt over the last few months, I still love this company long-term.

BABA’s growth prospects remain strong, so I’m going to use these headlines to grab shares of the stock at a huge discount. I’m recommending buying here and to add shares on any pullback.

I believe the recently issues that have come up will ultimately end up being a small blemish on an otherwise phenomenal success story for BABA. Its revenues and profits in my opinion are real, and that is why it’s a buy.

In the Spotlight: More stimulus means more price action…

After some last-minute uncertainty, the President has signed the latest COVID-19 relief bill.

The package provides a new batch of $600 checks that will be sent out to individuals, as well as additional funds for small business, and continued expansion of unemployment benefits.

And much like the last time the government sent out stimulus checks, the flood of money that could potentially pour into the market should result in some huge price movements – particularly in stocks in which retail investors typically put their money.

I’ll be on the lookout for any potential breakout movements as the new round of relief starts hitting Americans’ bank accounts, and I’ll be back with more recommendations for how to ride the wave to profits.

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