Mark Yusko, founder and CEO of Morgan Creek Capital Management, is very bullish on a stock that noted short seller Jim Chanos of Kynikos Associates continues to attack: Alibaba.
"Jim Chanos says [Alibaba] is a fraud. It is not a fraud. It's the largest e-commerce company in the world; it's approaching Amazon for being the largest cloud company in the world; it's the largest payments company in the world," Yusko told investors at the Morningstar ETF conference last week. "It's a monster behemoth."
China's online retail market is the world's largest, with roughly $630 billion in sales last year, according to research by management consulting firm McKinsey & Co.
E-commerce in China is nearly 80 percent bigger than the United States', which it overtook some two years ago. Chinese e-commerce accounts for 13.5 percent of all retail spending, a higher share than that of all large economies except the U.K.
"People just can't comprehend that the middle class in China is bigger than the population of the United States and Europe combined," said Yusko, who runs the Morgan Creek Tactical Allocation Fund and previously managed the endowment offices of Notre Dame University and the University of North Carolina at Chapel Hill.
Yusko expects the double-digit growth for Chinese e-commerce to continue for the next decade. Alibaba's U.S.-traded shares have climbed more than 50 percent in the past year.
"BABA could double from here — easy," Yusko said.
On Tuesday, Chanos repeated his criticism that Alibaba's investors do not see full disclosure of the company's financials, while speaking at the Delivering Alpha conference sponsored by CNBC and Institutional Investor.
Chanos said he is concerned that Alibaba is growing its balance sheet faster than its business — in particular, its logistics arm. He has previously told CNBC he has "real questions" about financial metrics and cash flow for Alibaba and, he added, "We just don't see how profitable or unprofitable that business is."
Joseph Tsai, vice chairman of Alibaba, said at the Delivering Alpha conference that Chanos "doesn't seem to try to understand the business and understand the power of the digital economy in China." He then invited Chanos to come to the company's headquarters. He also paid Chanos respect for his ability to "withstand that kind of pain" resulting from his short position.
Chanos has been among the most outspoken market critics of the Chinese economy as a whole and continues to make grim predictions, recently comparing the Chinese financial system to Wall Street before the housing crash.
While the short position Chanos has in Alibaba has not worked out, Yusko was right on one of his most bearish calls in recent years: In early 2015 he predicted oil would hit $30 when many thought crude had already hit a bottom. Yusko made a new big call on the energy sector at the Morningstar ETF conference and unveiled his own big short.
