Insights

1 Stock to Buy and Hold for the Next 10 Years

This leading Chinese tech company is one that investors should buy for the long term. – Bull stocks

The global business environment is undergoing some challenging times right now, thanks to the Covid-19 outbreak, rising geopolitical conflicts, and slowing global growth.

Yet, amid these challenges, a handful of companies – especially those operating in the digital sector – continue to grow their businesses.

In this article, I’ll share with readers one of these companies that not only is doing well today but should continue to do so over the next decade.

The technology conglomerate

The company I’m talking about is none other than Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988), a leading technology company, both in China and in the world.

Its business activities span across e-commerce, cloud computing, digital media and entertainment, fintech, and more.

Listed in the US in 2014, Alibaba debuted on the Hong Kong stock exchange last November under the ticker “9988”.  

Dominant e-commerce business

One of the biggest reasons investors should like Alibaba is that it has a dominant e-commerce business in China.

It enables more than half of China’s retail e-commerce transactions through its e-commerce platform Taobao Marketplace and Tmall.

Its dominance in this industry is evident through its high annual active customers. As of 31 March 2020, it has 726 million annual active customers.

This 726 million represents customers who have transacted on its platform in the last 12 months. Amazingly, that number is about half of the Chinese population.

The e-commerce giant is well-positioned to grow thanks to the continued migration of the retail industry from offline to online.

Moreover, its dominance in the e-commerce industry allows it to expand into new businesses by leveraging its existing user base.

For example, it has expanded into financial technology, online videos new retail, and food delivery services, to name just a few.

Fast-growing adjacent businesses

Started as an e-commerce player, Alibaba has diversified into new categories like cloud computing, fintech, logistics, entertainment, and more.

Most of these businesses, though unprofitable, have been growing at breathtaking speed in the last few years.

For example, Alibaba’s cloud business grew its revenue by 58% year-on-year in the previous quarter to RMB 12 billion (US$1.71 billion).

Cainiao, Alibaba’s logistics segment, grew revenue 49% in the last financial year while local consumer services (Eleme and Koubei) saw revenue increase by 41% in the last financial year.

Beyond these, Alibaba has other fast-growing businesses – such as Lazada, Hema, and more – that are growing at double-digit rates. Collectively, these businesses will power Alibaba’s growth for the foreseeable future.

Foolish conclusion

Traditionally, investors can invest either in stable blue-chip companies or high-growth volatile small companies.

In Alibaba, however, investors are getting the best of both worlds – a solid blue-chip growing at high rates.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga does not own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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