r/baba
Can we finally say we were wrong?
The author argues holding BABA for 4 years was a mistake due to massive opportunity costs vs S&P 500, even after adjusting for inflation.
- The stock is still considered genuinely valuable and retains deep value characteristics.
- Buying at current depressed levels avoids the multi-year dead money trap if it eventually recovers.
- BABA returned to its 2022 price, resulting in a 12% real loss in purchasing power over 4 years due to inflation.
- Massive opportunity cost compared to the S&P 500's 54% real return over the same period.
- The market's 4-year verdict indicates the bull thesis on fundamentals and sentiment was incorrect.
Don't get me wrong, I'm not just saying this because the stock is falling like a knife right now.
I owned it, held it for about 2 years, and sold earlier than I wanted with a great profit. Looking back, it was deep value an unloved stock that is genuinely still valuable. I honestly wanted to hold it forever, but I had to play it safe since my portfolio was way too concentrated in it.
But think about the brutal opportunity cost right now. BABA ran up and crashed right back to where it started. It was at this $92 level over 4 years ago in March 2022.
Because of inflation, holding it flat actually means you lost money. Today's $92 is actually only $81 of real buying power compared to back then, meaning you took a 12% loss in purchasing power. So, even if you "broke even" on paper, inflation ate your money alive.
You could have bought it today. Or, you could have parked that money in the S&P 500 instead. Since March 2022, the S&P 500 is up about 76% on paper. When you adjust that for the same inflation, it’s still a real, true return of about 54%. That is a massive missed opportunity compared to bleeding value in BABA.
Correct me if I'm wrong, but for us to have been right, the stock shouldn't have dropped back down to this level. The market has had 4 solid years to weigh everything; sentiment, the economic outlook, and the business fundamentals etc. and it did and it's voting that we are wrong. Do we need to stay at the low level for a few more years to finally admit that we are wrong?
They say the market is a voting machine in the short term and a weighing machine in the long term. Well, we need to redefine "short-term," because 4 years isn't short, man. Some people have been stuck holding this for much longer.
Even if it goes to 300 in 5 years time you could have bought today instead of 4 years ago or whatever.