Forget the FANGS – here are the BATS


FANGS – Facebook, Amazon, Netflix, Google

Well respected former Macquarie analyst Alex Pollak has written a good article on the BATs in Livewire today. BATs are Baidu, Alibaba, and Tencent. Alibaba is within a whisker of being the world’s most valuable retailer with market cap of US$473bn. It is up 95% since January alone. Amazon is up a ‘mere’ 33%. Tencent is up 85%. Consider this. The only computer most Chinese have ever used or owned is a Smartphone. They do not have laptops only a phone. As a result everything gets done on the phone, shopping, chatting, banking, everything. As a result the Chinese are a world ahead on fintech and phone apps. Internet penetration in China is only 53%. In the US it is 95%. People in China are underbanked – only 80% of adults had a bank account in 2014, up from 65% in 2011. Instead of banks the Chinese use Tencent and Alibaba payment systems for their banking needs. China has 5 banks in the Global top 30. We have 1. For investors looking for a FANG alternative maybe BATs are the way to go. Alex Pollak certainly thinks so and has done very well for his fund on the back of it.


BATS come home to roost

Some discussion in the press of the BATs. We looked at the BATs a little while ago. Baidu, Alibaba and Tencent. In the US there are the FANGs. Alibaba has doubled in the last 12 months. Baidu is up 50% too. Facebook stock has soared 46% this year and Amazon is up around 30%. Alibaba, which retains the crown of China’s most valuable company with a market capitalisation of $US450bn, is trading at a PE ratio of 57x, whereas both Facebook and Google have PEs of around 35x. The FTSE Russell Index added China large cap tech stocks to the popular benchmark on Sept 19, finally including Baidu and Alibaba. There will be a four-tranche inclusion of tech stocks in those indices holding China. The first tranche occured last week; the next one is set for December. The last two will take place in March and June next year.