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Alright let’s keep this China train rolling along as we are in the search for a handful of Chinese companies to invest in. Last episode we looked at Alibaba and today we are going to look into their biggest rival, Tencent.
And today I’m going to do a full analysis of Tencent.
Now i’ll focus on the company in this video, but if you want more of an overview of investing in China, my video about investing in China is the place to start.
Like Alibaba, Tencent is a tech giant based in China.
Tencent is the worlds largest video game company, one of the largest social media companies and one of the largest venture capital and investment companies in the world.
Tencent are involved in hundreds of different areas and they are a strong player in all these places. For example,
Music - Tencent Music Entertainment has 120 million paying subscribers… which is about the same as Spotify.
Gaming - think Fortnite, League of Legends, Call of Duty. and the rise of eSports.
Social media - WeChat, with 1 billion users.
Banking, insurance, movie production, virtual reality, ride sharing, real estate, space technology,
They really have their fingers in every pie. It is truly a mega conglomerate.
Its hard to think of a company to compare it to that you might be familiar with.
I guess its part Facebook, part Google, part Tesla, part EA sports.
But with great diversification comes the problem whether they can actually manage all these different areas?
Wechat and gaming are the most important parts of the business.
WeChat offers mobile banking, stock trading and even buying movie tickets.
It integrates with Didi (which is the Uber of China) so you can order a taxi on the app.
And many companies are selling directly through WeChat.
Tencent is at the heart of the Esports revolution. It’s not just the massive growth in people player their games, but its actually the growth in viewers watching people play the games.
In 2017 the total viewers of esports reached 335 million people, to a predicted 2021 557 million.
And as popularity grows and awareness grows, so does the revenue.
These stats clearly show the rapid growth in esports, and even in the USA, where most people would think that traditional sports are more popular, well Esports is second only to the NFL, and it beats Baseball, Basketball and hockey.
Tencent is capitalising on a new generation of sport fans.
Because WeChat is a monopoly in the Chinese market, critics are quick to point out any anti competitive behaviour. Also the company has been described as not an innovator, rather a bully, using it’s money to control it’s markets.
Like Alibaba in the previous video, I don’t see many issues with Tencent and so far I really am impressed.
But if I am impressed, I bet thousands of investors are impressed as well, so let’s see if they are financially strong and the company is not over hyped.
Now there are the three key areas to the health of a business.
Do they have too much debt?
Is the company growing?
Is the company well managed?
Now we want to see a company pass all three of these areas. But unfortunately it is a bit of an art, but I have general rules about each criteria.
I developed my criteria from the legendary investors Benjamin Graham, Warren Buffett and Bill Ackman.
Well like Alibaba, Tencent is a strong company but the current share price is just too high. But I would happily be an investor if the price was to get to $277 HKD.
So to summarise everything,
Tencent is a great company and is performing really well. I think they are a little aggressive with their current ratio, but it isn’t a big red flag.
The current price is too high, but a 30% fall in the markets is possible, but for such a strong company, it is unlikely.
I’m definitely adding Tencent to my list of companies that I will be watching.
They are the dominant social media player in China,
They are in the box seat of the future of eSports.
China is a huge market
They are investing in the future
Many different revenue streams.
And their finances are solid.
Now, Chinese companies do not have the most trustworthy reputation regarding financial reporting. So, i’m not going to go out and pay any more than what I think fair value is including a good margin of safety.
But I will be pouncing if the companies financials are still solid in the future and the price reaches my first buy in price.
Until then, I’ll keep looking for investment opportunities in China, I now have 2 Chinese companies that I like. Maybe I will find some more.
Hit subscribe if enjoy my analyses and see you in the next video.
Your estimates are way too conservative
awesome video man, what du u think about TME stocks? I mean big names like BAILLIE GIFFORD & CO and CANADA PENSION PLAN INVESTMENT BOARD, recently bought shares. I want take a position too, but i am not sure, cuz of the internet there in China and cuz the app is really cheap, i mean its not like Spotify 10$/month. So i was wondering, what are ur thoughts about TME?
Où est la discothèque?
Tencent is a company I was anyways interested in because they own epic games and fortnite is growing like crazy
But I don’t think it’s for me just yet
Thanks for the insight Kevin! My inky question, when researching Tencent, there is Tencent Music (TME) and Tencent (TCEHY). Exactly which of the two are you referring to? Thanks a million sir!
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BAT Stocks Explained - aka the Top 3 Stocks in China. BAT = Baidu, Alibaba, Tencent. Today we will go over 3 of the top Chinese Stocks.
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Great video Brandon ! I was wondering where can you buy these Chinese stocks if I am currently located in Canada? Thanks :)
Haha I’m actually posting a video on Alibaba later this week! Analysts are against it, but I think it will continue to do well. I also hold Tencent. All 3 are great picks!
Well done, Bij! Love to you from Asia.. watching and learning tons.. beaming with pride from Naga Cam Sur , Philippines! ?????❤️
very nice analysis , good job man
Do you have any views on the Chinese Netflix iq
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I would love it it would be true that VET is locked to BITCOINs movement . But .. It seems we are only going down with BITCOIN... But VET is not rising with it.. Wich is a new and strange development.... Why is that?.... Anyone?
can vet reach to 2$ in 2021 ??
Remember back in May, 2010 Bitcoin was .008 A year later in March of 2011, Bitcoin shot up to $134.00 dollars and then settled at around $12.00 buy the end of 2011. Anything is possible.
That vid made so much sense. That blockchain company Lisk has the highest commits in the crypto space on GitHub. You should check them out satoshiboomin.
Is this one worth holding. Thinking about rolling some BTC in hopes for greater potential gain. Does this have a shot?