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As the trade war between the U.S. and China intensifies further, one firm is betting on Alibaba, a company with as much exposure to China as you can get.
Jefferies initiated Alibaba at a "buy" rating and a price target of $216 on Monday, arguing the Chinese e-commerce company is a "strong cash cow marketplace model with huge potential."
But Steve Weiss of Short Hills Capital Partners, who sold Alibaba two weeks ago, is more bearish.
On Monday's "Halftime Report, " he explained, "I sold just because you can't have those kinds of trades in this kind of environment. And it dropped like a rock" — with Alibaba falling 11.5% from he got out through Monday's close. "China is going through their own economic issues, obviously... I just don't believe it's the stock to play at this point."
Adam Parker, CEO of Trivariate Capital Management LP, is skeptical of Chinese stocks in general and prefers to stick with U.S. equities. He said of Alibaba, "Right after I heard the most bullish pitch — it's amazing, it's like every U.S. company combined — it went down like 40%. I do U.S. equities anyway. I just think [Alibaba] is impregnable to any research I could get comfortable with."
Individual public Chinese companies are too risky, agrees Josh Brown of Ritholtz Wealth Management. As an example, he said, "Look what they did to Tencent. The company had political difficulties because the [Chinese] government decided: too much video games. " By instituting a freeze on video game approvals, a major source of Tencent's revenue, for most of 2018, the government "cut [Tencent's] stock in half. That can happen at any time with these names."
Brown instead recommends that investors look at Chinese tech ETFs such as KWEB rather than individual stocks "if you're someone who wants exposure to Chinese internet companies." But Brown isn't buying the KWEB ETF just yet, due to a lack of clearly defined, positive price momentum. Brown adds, "I would not own [KWEB] here because there's no trend. But in a trending environment...if you really want exposure, a) I would wait for an uptrend — a statistical uptrend, not a technical [one] — and b), I would buy the basket."
If you believe in Alibaba's upside, you could also make the case to invest in the broader emerging markets space as a longer-term play, as Joe Terranova of Virtus Investment Partners advises. "When you bring forth Alibaba, you immediately think of the troubles overseas and the emerging markets. Okay. On a longer term perspective, you want to go buy Alibaba? Step right in, buy the emerging market asset class... [If] BABA's going to work, the emerging market's going to work."