Long-term investor explains why he likes Amazon but is 'not crazy' about Alibaba

Published Thu, Apr 14 202212:46 AM EDT

Amazon is "definitely a stock to own," but Alibaba is less attractive than before, according to Sid Choraria, a senior portfolio manager who previously attracted the attention of Warren Buffett for uncovering an under-followed Japanese pharmaceutical company. "Amazon's one of my favorite businesses in the world. It is one hell of a company," Choraria of Gordian Capital said during CNBC's Pro Talks on Wednesday. Choraria said Amazon provides great customer service at really low prices, which is "quite remarkable." Unlike Meta, which paid $1 billion for Instagram , Choraria said the e-commerce giant takes small bets, pointing to Amazon Web Services. "AWS was tiny," he said. "Now, as I said, it contributes 75% of Amazon's operating profit." Additionally, he said Amazon's advertising revenue is "remarkable" and surprising. "This is definitely a stock to own," he said. "I think the question is the price." Slightly less constructive on Alibaba The risk-reward ratio has changed for Chinese tech giant Alibaba, Choraria said. "I thought the upside was significant compared to the downside prior to the Russia-Ukraine situation," he said. A Los Angeles-based newspaper tied to Charlie Munger recently slashed its holdings in Alibaba, according to a filing released on Monday. Choraria said "things have changed significantly" since Munger, the longtime business partner of Warren Buffett, took that stake in Alibaba. "With the Russia-Ukraine war and China's perception with the West, that's new information. And Mr. Munger probably has taken a closer look at kind of the new world order and has changed his mind," he said, which is "not typical." Markets have been volatile since the war began, and investors are looking to hedge their risk . Alibaba's U.S.-listed shares are down nearly 60% in the past year, hammered by regulatory tightening in China. "There's a reason for why Alibaba's priced the way it is," Choraria said, pointing to uncertainty in terms of geopolitical and regulatory risk. He said he is "slightly less constructive" on Alibaba unless there's more clarity over the Russia-Ukraine war. He also said Alibaba's revenue growth was "not very impressive" at 10%. "The economy, let's say, is growing 5%, 6%. I would want Alibaba to grow at least at four times China's GDP growth," he said. "I still like the name, but I'm not crazy about it," he added. That said, Choraria suggested that Alibaba may be considered cheap since its market cap is around $270 billion compared with Amazon's more than $1.5 trillion. China's economy was worth nearly $18 trillion in 2021, while the U.S. reported GDP of around $23 trillion. "The difference is stark," said Choraria. Before the war in Ukraine broke out, $100 would have be a "no-brainer price" to buy Alibaba, he said. "I'd be delighted if Alibaba falls to $50 because I think it would be a steal, one hell of a steal," he said. The stock closed at $100.03 on Wednesday in the U.S. Its 52-week low was $73.28, according to data from Refinitiv Eikon. Still, Choraria said Alibaba is one of his bigger stakes. — CNBC's Jordan Novet, Yun Li and Arjun Kharpal contributed to this report.

Amazon is "definitely a stock to own," according to Sid Choraria, a senior portfolio manager who previously attracted the attention of Warren Buffett.

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