TENCENT stock why INVEST in it? (0700.HK$)

hi everyone how are you all doing hopefully well welcome to another video today i just want to take a few minutes to talk about why i'm investing in tencent as always this is not financial advice i am just publicly documenting my own personal investment decisions so please don't base your financial decisions on a youtube video like this one also you've probably noticed if you follow this channel that i've been investing in a lot of chinese companies i already made a video explaining why i think it's risky not to be exposed to chinese companies in the following decades so consider watching that video after this one i will leave the links in the description because it helps to get an overall macro perspective of why i'm doing these uh specific decisions also this week actually today coinbase is going to get its direct listing so it's going to be publicly traded and i'm using this hype or momentum to sell some of my old coins and use those profits to invest into chinese companies or more speculative or risky stocks in my long term portfolio because yeah some altcoins have the potential to 10x but they also can easily as as fast code to zero and companies like tencent i don't view them as going to zero then again this is just my first position in this company if you want to know exactly when i make my positions consider following my page my instagram page cadet.invest where each they are each week as soon as i make a position for that long term investment portfolio i post there because not every day i don't have time to be recording editing and posting these videos as soon as i make a purchase so it might take like a few days or even a week more than a week so if you want to know exactly when i'm doing my positions just consider following that page having that said i am a long-term investor so it doesn't really makes a huge difference if i'm buying this talk today or if i'm buying the stock in the following week but enough of that let me explain first of all what is a tencent tencent is basically a giant chinese corporation a ticker symbol zero seven zero zero because i'm buying it directly on the hong kong stock exchange because you always have the risk of chinese companies being delisted from the us stock exchanges so if you want to search at stock 0 700 basically and when i'm analyzing chinese stocks i always like to give to have like a comparison to a u.s or a european stock because i'm i live in portugal so i want to be have some term of comparison with the company that i know or at least i have more contact with like i had with jd.com and amazon or alibaba ebay amazon whatever in this case um tencent has proven to be really one in a kind in the sense that it's really well diversified it seems like you they they are a facebook then combined with some kind of gaming streaming industry they also have the cloud sector it's really um huge the spectrum of businesses that they have well it's a well diversified but they mostly offer online services and what i like about that is because that comes with high margins uh but i will take a deeper look when i'm analyzing my excel spreadsheet i just want you to have that into consideration in consideration sorry in terms of revenue segments 56 of their revenue segments is from value added uh businesses and that includes gaming and i'm quite a gamer myself so we probably heard names like fortnite epic games well tencent that's basically tencent you all probably also heard or played clash of clans or clash royale supercell tencent also other another game league of legends tencent so you can see that tencent has a lot of stake in games that even here for for example in portugal we have a lot of contact with or at least i know a lot of people that play this type of games they also have a stake in streaming platforms like huya uh which is like a twitch from china so it's good to have i hope before investing in tencent i i did quite a few uh research on chinese gaming stocks and streaming because i want to be invested in the gaming sector because that's been a really a big part of my life i'm still a gamer not as much as i used to be as a kid and i think it's a cool thing to make sure the world's gaming my gaming experience with the investment knowledge whatever you want to call it and i think it makes sense sometimes to be invested in companies that you really like but that's not a priority in my case then um 26 percent is allocated to fintech and business services 18 to advertising revenue and 2 to others also tencent i just remember and this is quite big they also have wechat which is like the what's up on steroids of china because i say on steroids because wechat app is far better than whatsapp and i use whatsapp a lot every single day actually but in their wechat is like they have the normal whatsapp then they have amazon they have venmo they have even tinder i think you can even book like a doctor's appointment it's it's basically i think it's really opie when having like a smartphone and you can basically do uh everything but imagine being able to do everything in one single lap that's how i feel about wechat maybe you have a different opinion maybe you can leave it down in the comments maybe you don't even use it um i personally don't use it a lot i only researched about i think i used it once or twice when i was having like chinese classes but that doesn't really matter but tell me in the comments if you use i don't use it because most of my connections don't use it so that's basically the my main argument to that and i think it's time for me to jump into the laptop just let me hit here the record button to see how the stock has performed in terms of stock price over the years and you can see here this is just a monthly short each candle of the shark is representing one month in price uh fluctuations and you can see the stock has performed quite well but at the same time you can see here that we have some periods of really big dumps you can see here the 50 term even here these ones look really small but this was a 23 this was 30 percent and right now we are seeing a pullback and i decided well maybe that this is a good idea for me uh to start starting at a position in this company because i think it will continue to have this massive growth not as much growth but still uh something to look at all right now we are a bit more than we are like 20 from all-time high so instead of having my money in some things like crypto assets that are already at all-time high probably it's a good idea to diversify to this stock of course we can even go deeper we can even go to 50 but then again my strategy for this stock is going to be dca dollar cost average so if it dumps even more fine my entry price will even be the average at least will start to be lower uh and lower and if you start pumping well good good for me i'm making money uh so like this is in terms of technical i'm not going to go super in depth you can always go with your trading view or find for other technical analysis that's never been my strong point here we have an excel spreadsheet really simple and you can see historically actually let me zoom in i know that if you're not financially like savvy this is quite simple but you can see the revenue how much money the company is making it's been really increasing you can see the average over the past five years it has been 34 which is crazy and their net income margin the profitability has been 28 which is crazy then again that's what i said in the beginning of this video online services i'm martin's and this is what i look for when i'm investing 2021 2022 this is analyst forecasts i made a view a few adaptations may be taking 1 billion or 2 billions doesn't really matter and i'm forecasting as always a normal case an optical optimistic case which is the bulk case and a pessimistic case the bear case when when it comes to shiny stocks i normally put a rate of return 11 12 because it's china i view it as more risky but in this case i'm going to only use a 10.5 which is still good because i view tencent not just as a chinese company but as a global company because i do interact with some of them uh some of the products of some of their subsidiaries not like a full chinese company that i never had any contact with and you've seen that the revenue growth has been growing for the past five years of four of um 34 and i always tend to be a bit conservative and remember these types of companies as they get more mature they will slow down these terms in terms of percentual growth but i am quite conservative in my normal case i made from 2023 to 2025 a 20 growth which is far lower than this and what analysts expect and the 15 growth from basically onwards 2025 to 2028 and with the net margin okay net margins are a bit big because we can see here uh we had like a 24 25 2020 has been a really uh exception basically due to the pandemic so we cannot really see this number but net margins we can assume them to go down but i'm also slowing down their growth so i'm comfortable with a 10 to 27 margin also i believe these types of business get more efficient over time um we have a fair price for the normal case of 556 uh hong kong dollars right now the stock is trading at 623 and of course in the pool case i'm using 27 growth and 20 from these dates i don't need to repeat myself also really optimistic a 30 um margin of net income margin so this is a really good optimistic and of course that's going to give us a higher valuation of nearly 800 hong kong soccer chains for that parliament parameter well we could see that whole time high would be really pricing in this optimistic scenario and in the pair case right now we are more or less in between the normal scenario and the bulk case so it's somewhere in between i'm comfortable with that and if we were at 500 uh dollars in hong kong dollars sorry basically the market was pricing in at 18 percent growth from 2023 to 2025 and 14 growth from 2025 to 2028 and of course the 15 sorry 25 net income margin as always i assigned some probabilities i'm going to give it a 40 to a normal scenario a 30 percent for bull scenario and 30 percent for sorry 30 to 35 for the bear scenario honestly i want to be a bit more bullish but i like to be conservative and we have a target price or an average intrinsic value of around 600 hong kong dollars and right now we are trading a bit of a premium but i don't mind paying this premium because as i think i am a bit conservative in my analysis maybe not so much in the margins but then again i really like this company i enjoy it and if the stock dumps even more i will increase my position remember i only made the position of 50 dollars that's really like nothing when you compare it to the long-term uh stock portfolio but i hope this position will keep increasing and growing and i will start adding more and more purchases and we will increase in value over time you can see here in terms of that they basically the the the red line is the total amount of debt that they have and these greenish or bluish line that's right below it it's the amount of cash in crash equivalent so basically they can pay this debt whenever they want and this is something i really like about chinese companies uh yeah that's pretty much everything that i wanted to cover in this video i don't want to be super um in-depth you'll see that you'll find far more complete videos on youtube or other platforms i'm here just publicly documenting my own personal opinion so that in the future instead of just looking at excel spreadsheets i can watch re-watch these videos and think oh so this was what i was thinking by the end i was really stupid because i didn't consider this so thank god i made this decision right now this is really profitable normally matter this is just a time capsule it's fun and i'll see you in the next video so bye

Channel: Pedro Cadete

Views: 83

Rating: 5 out of 5

Keywords: pedro cadete, tencent stock analysis, tencent stock prediction, tencent stock 2021, tencent fair value, tencent intrinsic value, tencent fair price, tencent fundamental analysis, tencent a buy, tencent stock, tencent stock undervalued, tencent stock overvalued, investments, investing, wealth, insurance, money videos, hong kong stock exchange, best stock to buy, safe chinese stock

Id: jTq7e1WgR68

Length: 13min 46sec (826 seconds)

Published: Sat Apr 17 2021