SoftBank Stock Analysis: Over-reaction, Now At 50% Discount To Value

SoftBank stock analysis and investment strategy that explains how could this stock fit a portfolio. See whether this if for you, the AI exposure, Alibaba, SoftBank Vision fund (with WeWork pulling down), Sprint, ARM – the chip maker and whether you think Masayoshi Son can repeat what he did in the past. Keep in mind, it took decades to make it, so have a long-term mindset. Enjoy

SoftBank Stock Analysis And Investment Strategy – 50% Discount to Value

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Transcript

Good day fellow investors. A company that is strongly exposed to the Internet of Things. It's the largest venture capitalists in the world. Can it also be a value investment? Well, it can. And in this video, we're going to explain the value investment part of SoftBank, how it is. undervalued, what is the huge potential upside? And what is the downside? What is the price you have to pay to get exposure to all that potential upside coming from all the things in the cloud? And if those things in the cloud don't happen? What do you fall on to what is the risk and the risks risks?

The limit is actually Alibaba sprint, the telecom they have in Japan, Japan, AR and the chip maker etc. So there is a lot of upside a lot of volatility, a lot of talk about we works about SoftBank vision fund Saudi Arabia funding it Blah, blah, blah. And then there is businesses usually on the other side, that the market might be pricing very wrongly and therefore it's a value investment.

Let's start with SoftBank. We'll discuss the value, the margin of safety, the growth, the strategy, the risks a little bit on individual companies, we works, the plan of master your son, the founder of sub for SoftBank for the next 20 years, and then you will see how that fits your portfolio. I expect a lot of volatility. So I also made a small investment strategy to put this

Softbank and Alibaba

How might fit your URL portfolio with low risk and high reward and you see whether that fits you or not. And whether you have a long enough investment horizon to invest in this. Let's start. So master your son, the founder invested 20 million in Alibaba in 2004, a 34% stake. He sold some of it recently but still owns 25% of Baba.

So that's the value of SoftBank owns 25% of Alibaba. And that is what you have to count on when buying such a company. Of course they paid 20 million for the stake. So there is gain taxes that they have to pay I think it's 30% in Japan so you have to discount for debt if they don't hold forever and enjoy the dividends. Baba might pay one day. But that's actually it.

If we look at more in detail, then you see shareholder value of all the things that are traded listed because all the commerce companies like SoftBank owns are listed is 10,630 yen, we have equity value of holdings and the net debt The company has on the corporate level on the holding level. So the value per share is 10,613. Now if I take all the 10,613 and accounted As profits, then we have to pay a 30% profit gain tax in Japan. So the value of the company after future possible taxes that might or might not come would be 7429 yen, the stock price is in the 4000s.

Softbank stock analysis: Core holdings

So 4100 4200 depending on the day you are looking at, let me give you a more detailed description of the value so Alibaba, then you per share is 5800 yen, the stock price is much lower. As I said, even if you account for 40% gain tax on Alibaba, you get to the current stock price. So if you buy SoftBank, you get Baba. That's it if everything else, I don't know just pays for the debt or manages that or is valued at zero Practically you get Baba after texts.

Everything else is pure upside everything else includes SoftBank Corp, the Japanese arm of the company the telecom there and Yahoo, Japan sprint. The telecom in the United States ARM the chip maker day acquired a few years ago that makes chips for most of your smartphones etc SoftBank vision fat fund the $100 billion fund that they invest in venture new ventures and then other values.

So this is SoftBank and the key here is ok this is a holding company holding companies always have a discount because you never know what will the owner master Yoshi Sam decide to do with the money if he takes sells Alibaba and ploughs now more money into we works. Of course, the the two businesses are not comparable and if he does that work.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver