Forget Alibaba Stock, Buy These 2 Lower Risk Stocks Set To Soar

Forget Alibaba Stock, Buy These 2 Lower Risk Stocks Set To Soar

MicroStockHub/iStock via Getty Images Alibaba ( BABA ) stock has been dominating the Seeking Alpha headlines lately, and not without good reason. Yesterday there were five articles written on BABA and all five were trending on Seeking Alpha this morning. Clearly, readers are very interested in debating the investment merits and demerits of this stock.

Of course, this isn’t a crazy meme stock scenario like GameStop ( GME ) or AMC Entertainment ( AMC ), where the stock price and hype are clearly divorced from the fundamentals of the business. Nor is it akin to the crypto-currency mania that fueled the rise of leading cryptos Bitcoin ( BTC-USD ) and Ethereum ( ETH-USD ) and sent meme-cryptos like Dogecoin ( DOGE-USD ) on a brief trip to the moon.

BABA is arguably the greatest e-commerce company in the world, with a commanding presence in the massive China market and also has several other booming businesses, including its vaunted artificial intelligence operation.

On paper, it looks like an amazing company with an equally impressive track record. Revenue continues to soar at a rapid rate and the company has begun deploying its massive cash pile into buying back shares hand over fist. However, despite its continued double-digit topline growth rate that beats even Amazon’s ( AMZN ) latest numbers, and clear competitive and balance sheet strengths that have even earned it Charlie Munger’s extremely rare endorsement, the stock has plummeted from a high of over $300 in late October 2020 to roughly one third of that value today: Data by YCharts Why is it continuing its relentless march lower despite its obvious fundamental qualities? One word: geopolitics. Between the Communist Chinese Party’s feud with BABA’s founder Jack Ma, general crackdown on technology giants in the country, the risk of Chinese stocks being de-listed from U.S. exchanges, soaring COVID-19 cases and severe government lockdowns, and – perhaps most pressing of all – the threat of China invading Taiwan and the expected massive economic fallout from that on major Chinese businesses, the geopolitical risks are massive here.

Perhaps even worse than the size of the risk, is the difficulty of handicapping how likely certain scenarios are to play out. No one seems to have a good handle on exactly when China will invade Taiwan, nor exactly how the U.S. and the rest of the world will respond. Will China invade next week, later this year, next year, five years, ten years, or never? Will the U.S. simply slap sanctions on China’s leadership and major companies, or will they get seriously involved in the fight itself? How much can the West really afford to punish China economically given that our economies have become so intertwined? This situation is potentially far more serious than the Russia-Ukraine conflict for these reasons and many more.

No one will argue that BABA is not a pound-the-table strong buy on paper here with its spotless balance sheet, strong competitive advantages that give it a wide moat, leading technological prowess, experienced visionary management, strong growth momentum, and a dirt-cheap valuation (9.34 P/E ratio). However, it is very difficult to argue that BABA should be anything more than a highly speculative investment given the size, scope, and difficult-to-quantify geopolitical risks that face it. Still others – such as Jim Cramer – will argue that it is ethically irresponsible to invest in China given its human rights abuse track record.

As a result, we think that investors should decide to either take a speculative swing on BABA or completely avoid it altogether, but the risks make it unfit to serve as a large or even medium sized position in a portfolio. Instead of getting caught up in the BABA hype, we think investors would be better served investing in two particular lower risk stocks set to soar without all of the geopolitical uncertainty. #1. STORE Capital Stock ( STOR )

STOR is a triple net lease REIT that has proven to be a very strong and reliable dividend stock as its dividend remained intact and actually kept growing through the COVID-19 pandemic. Since its IPO in 2014, STOR has grown the annualized pace of its quarterly dividend from $0.11 to $1.56 and AFFO per share from $1.41 to $2.20. That is a very attractive combination of dividend growth and AFFO per share growth, implying that its dividend growth rate is on a sustainable course.

Today it yields nearly 5.4%, with a very safe 71% payout ratio and a well-diversified portfolio of properties backed by high quality triple net leases. […]

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