Market Health

Going Small on This Singles Day Opportunity

Panic creates opportunity.

That’s a rule every investor should live by.

Or for those who are fans of Dune (the book, the old movie or the new movie), there is Bene Gesserit’s litany against fear: “I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration…”

Personally, I love uncertainty.

I love when markets are in a tizzy over whichever apocalypse is going on in a sector on a given day.

I love when I mention a sector and other analysts cringe because they’re afraid.

As I have said before, when there is blood in the streets, there is opportunity… and there are discounts.

That’s the perfect combination for landing big returns.

A Tech Stock Meltdown

There aren’t many market sectors triggering more fear than China.

And there are so many headlines for the recent Chinese market meltdown that some news organizations have their own pages dedicated to it.

But I hear the ringing of cash registers when everyone else hears alarms.

The KraneShares Hang Seng Tech Index ETF (NYSE: KTEC) has tanked…

Between June and the start of October, the index dropped nearly 27%.

Though, that’s far from the pain that individual Chinese tech stocks have suffered in recent weeks. Many names are down 50% or more from their 52-week highs after fears boiled over.

Now, if you’ve ever worked in a kitchen, you’ve undoubtedly heard the phrase “A falling knife has no handle.”

You are taught to instantly raise your hands above your head when a knife drops. That’s to counter our instinct to try and catch the knife, unintentionally hurting ourselves on the blade (or any other dangerous piece of equipment).

In investing, there’s a play on this idea: Don’t try to catch a falling knife.

No, I don’t think that Chinese stocks are a falling knife. Since the start of the month, the KraneShares Hang Seng Tech Index ETF has risen about 10%.

But I do think there’s plenty of upside for what lies ahead.

A Historic $100 Billion-Plus Opportunity

There are a lot of major catalysts on the horizon, particularly for retail.

In the U.S., Thanksgiving will officially kick off the holiday shopping season rush.

But my favorite shopping day to target isn’t Black Friday. It’s not even a U.S. shopping holiday. It’s China’s Singles Day, the largest shopping day in the world.

This holiday began in 1993 at Nanjing University as Bachelor’s Day. It takes place on November 11 because the number one resembles a “bare stick,” which is slang for a lonely man in Chinese.

Now, this is an unofficial holiday – like Amazon’s (Nasdaq: AMZN) Prime Day. But it’s been surging in popularity.

And it just keeps getting bigger and bigger.

Last year, sales set a new record. The Chinese online retail giant Alibaba (NYSE: BABA) raked in $74 billion during its Singles Day event. That was a 92% increase over 2019.

And keep in mind that those are the results from just one company.

For comparison, the largest online shopping day in U.S. history was Cyber Monday in 2020. Sales totaled $10.8 billion.

And that included every company.

Alibaba has made Singles Day its own.

But the company’s rival, JD.com (Nasdaq: JD), started its own November 11 celebration. The e-commerce platform Baozun (Nasdaq: BZUN) is also in the mix. There’s also Tencent Holdings (OTC: TCEHY), Joyy Inc. (Nasdaq: YY), Vipshop Holdings (NYSE: VIPS) and a whole bunch more.

So here’s the deal…

Buying shares of Alibaba to play Singles Day isn’t the best route. I know it seems like the obvious choice, but the below chart tells a different story about the best Singles Day opportunities.

This is the performance of several Chinese e-commerce stocks from November to April from 2017 to 2021.

Vipshop shares averaged a 62% gain from November 1 (just before Singles Day) to April. That’s more than three times the gain of the second-best performer, JD.com.

And Alibaba shares averaged a gain of only 1.3% during the same stretch.

This is a situation where bigger isn’t better.

Alibaba transformed Singles Day into a global phenomenon. But that doesn’t mean it’s the best way to play this retail trend.

Few investors want to tread into the turbulent airspace of Chinese stocks. But take Bene Gesserit’s litany against fear to heart. Letting fear get the best of you could mean missing a tremendous opportunity for gains on the world’s largest online shopping day of the year.

Here’s to high returns,

Matthew

P.S. Have you had any luck playing Singles Day in the past? Let me know in the comments below.

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