01/08/2015 7:00 am EST
Our top investment idea for the coming year is a company that owns an 80% share of China’s online shopping market, which will only grow bigger as smartphones give more consumers online access, notes Paul Goodwin, global expert and editor of Cabot China & Emerging Markets Report.
Alibaba (BABA) is my pick partly because of the company’s position in China and partly because of its potential for expansion outside China.
Alibaba’s e-commerce sites—Taobao Marketplace, Tmall, and Juhusuan are the main ones—connect buyers with sellers, consumers with other consumers, and companies with companies.
Founder Jack Ma was an English teacher who founded the business as a way for customers outside China to connect with Chinese suppliers. Alibaba’s enormous IPO in September raised over $25 billion, the biggest ever.
And with the money raised, Alibaba will have a mammoth fund for acquisitions and development that Ma can use to reinforce his operation in China or to bring Alibaba-style commerce to the rest of the world.
Alibaba now has a market cap of over $271 billion and enjoyed 56% revenue growth in 2014. Sales in 2014 have increased by 39%, 45%, and 53% respectively, during the first three quarters.
Earnings are forecast to grow 20% in 2015 and 38% in 2016, but that doesn’t take into account the businesses the company might buy or other businesses it might move into. Alibaba is the biggest China story around.