- Since August 6, 2020, WeChat
along with TikTok have
been in the crosshair
of the U.S government over
national security concerns.
The executive order
issued by the White House
states that 45 days from the said date,
Americans will be prohibited
from doing business
with the parent companies
of TikTok and WeChat.
Aside from politics,
the ban sent the stock
of Tencent Holdings,
the parent company of WeChat tumbling,
losing its stock value of
nearly 66 billion dollars
in just 2 days after the order was issued.
But recently, TenCent
shares have been going up,
and gaining steady momentum
after White House officials
privately reassured
U.S. companies that they
can still do business
with the WeChat app in China.
It is a big relief for
many American companies
doing business in China.
For example Apple would
lose sizable revenue
from its iPhone sells because
according to a Chinese survey
of more than 1.2 million users,
95% of Chinese iPhone owners
would switch from Apple to
another smartphone brand,
rather than giving up WeChat.
Why does this survey matter?
Well, WeChat is a Chinese
multi-purpose messaging,
social media and mobile payment
app developed by Tencent.
It is a super app, if you will.
It has more than 1.17 billion
users around the world.
And TenCent Holdings has
built an eco-system in China
that its users heavily
dependent on its platform
for nearly everything.
How big is that eco system?
And what is in the future for Tencent?
How it has been able to expand
globally under the radar?
(upbeat music)
Hello everyone.
My name is An and today I
am going to discuss reasons
why I am adding shares of
TenCent Holdings to my portfolio.
We will look at Tencent's
Strong growth in China
and global market, and its
diverse investment portfolio.
I spent lots of time and
energy to make this video
to save you time from
doing your own research.
Please smash the like button below
if any part of the
video is helpful to you.
It means a lot to me.
By clicking that like button,
and subscribe to my channel,
you help my channel to grow,
and that will encourage
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And if you've just
clicked the like button,
here is my heart to you.
So, what makes Tencent so special?
Here in the U.S, we often hear FANG stocks
Facebook, Amazon , Netflix,
and Alphabet which is Google.
We all know what these
companies are, and what they do.
In China, Tencent Holdings, in a way,
is all FANG combined under one company.
Under which WeChat app
owned by TenCent alone
has more than one billion
active users monthly.
People in China buy clothes,
groceries, pay their friends,
pay utilities, book a cab,
book doctor appointment,
apply for visa, and check
driving records by using WeChat.
On top of that WeChat
has many mini programs
within the apps to support
many more of Chinese consumer needs.
Even famous luxury brands
like Burberry, Louis Vuitton,
Cartier, Dior sell their
merchandise through WeChat.
Without a doubt, WeChat
is the most essential app
to Chinese consumers.
Foreign companies need to work with WeChat
if they want to penetrate
to the Chinese market.
And that is not all.
Tencent also has TenCent
video app, which is basically
the YouTube of China,
and Tencent music app QQ
is pretty much a Chinese Spotify.
But its QQ music app
is actually profitable,
and has over 800 million
monthly active users.
TenCent QQ also has investment
coming from Spotify,
Sony, and Warner Music.
Tencent has its own music division,
Tencent Music Entertainment or TME.
In 2017, TME and Spotify made a deal
to swap shares giving Tencent 7.5% stake
in the streaming giant Spotify.
The two companies will invest
in each other's music business.
TenCent is also the beast
of online gaming in China.
In fact, this is where the
bulk of its revenue comes from.
It is 3 times bigger
than the second largest
gaming company in China, NetEase.
Okay, talking about gaming.
With the exception of
Sony, Tencent's revenue
from gaming is up there
with the big names like
Nintendo, and Microsoft.
However, Tencent is the
world's biggest gaming company
if concentrating only on
online gaming, and exclude
the game console-makers
such as Sony, Microsoft, and Nintendo.
Established game
developers such as Nintendo
spent several decades
building up game franchises
and game characters.
TenCent is taking a different approach:
Investing in, and buying
up major game makers.
Tencent owns a substantial
portion of Epic Games,
a North Carolina-based
company behind "Fortnite".
The Epic Games Store,
and the software suite
called "Unreal Engine" that
powers many game titles.
It also owns 84% of Supercell,
a Finnish mobile gaming powerhouse
behind "Clash of Clans",
"Clash Royale", and "Brawl Stars".
And that's just for
starters, Tencent also has
stakes in "Call Of Duty"'s publisher,
Activision and "Assassin's
Creed"'s publisher Ubisoft.
And it does not stop there.
Chances are your favorite songs
or movies are funded by Tencent's money.
Tencent has recently
completed a deal giving it
a 10% stake in Universal Music.
A record label includes major artists
like Lady Gaga, Taylor Swift,
Drake and Kendrick Lamar.
Tencent Pictures, the film
and production arm of Tencent,
has been involved in a large
number of Hollywood movies,
including "Kong: Skull Island",
"Terminator: Dark Fate", "Wonder Woman",
"Men in Black: International",
and the upcoming "Top Gun: Maverick"
scheduled for release in 2021.
While Amazon, Facebook, and PayPal
were on all over the
news in June this year
for taking stakes in Gojek,
an Indonesian ride-hailing service;
TenCent had already invested
in Gojek back in 2017.
This year, many investors
have enjoyed the performance
of Sea Limited stock,
ticker: SE, appreciating 880%
but may not know it and Tencent
had formed a long-term strategic
partnership back in 2018,
where Tencent granted Garena,
the digital entertainment arm
of Sea Limited, a right of first refusal
to publish Tencent's mobile
and PC games in Indonesia,
Taiwan, Thailand,
the Philippines, Malaysia, and Singapore.
And, here is a kicker: Tencent owns 5%
of Tesla, and 15% stake in
Chinese electric car maker Nio.
It is no secret that big
tech companies like to invest
in unicorns, and Tencent
is not an exception.
While Japan's SoftBank Group
has an investment portfolio
of 42 unicorns.
And Google Alphabet, the
parent company of Google,
has acquired over 200
companies and invested
in more than 103 companies.
TenCent Holdings has invested
in over 800 companies
all over the world, of
which over 160 are unicorns
that valued at more than $1 billion.
Both TenCent and Google
have stake in JD.com,
a Chinese e-commerce giant,
of 20% and 1% respectively.
With the number of
unicorns and other ventures
under its belt, TenCent has not stopped.
Just recently the company
announced to pledge
$70 billion US dollars
over the next five years
in technology infrastructure
including cloud computing,
artificial intelligence,
and cybersecurity.
The announcement comes after call
by Chinese government last month
for a tech-driven structural
upgrade and a surge
in demand for business
software and cloud services.
So if you buy a share of
TenCent, you are investing
in not just Tencent Holdings Limited
but through its subsidiaries
which include social
networking, music, web portals,
e-commerce, mobile
games, Internet services,
payment systems, entertainment,
artificial intelligence,
and technology solutions.
So why I'm investing in Tencent now?
Honestly, I missed the
boat when Tencent share
was round $40 back in March.
But I am not regretting because there were
so many quality stocks to
choose from at the time.
But now I have some fund
available to invest,
and Tencent is the top candidate
for reasons I mentioned earlier.
Tencent has smashed the
second-quarter earnings estimates,
and analysts expect it will
continue to do well this year.
The current recommendation
rating is a solid buy,
according to Yahoo Finance.
I own some Chinese
stocks, including Alibaba,
and I think that Tencent
more diverse than Alibaba
and Baidu, and is one of the best stocks
for long-term investment.
Like I mentioned at the
beginning of the video,
the concern over WeChat ban is behind us.
And even if the ban still in effect,
it would only impact a fraction percentage
of its global users.
And since Tencent still
generates most of its revenue
from China, the ban would
have been ineffective
to its bottom line.
By the way, Tencent is not
listed in the major US exchanges.
It's being traded over the counter.
It means that the shares
are unlisted and purchases
need to be routed through market makers
who keep inventory of the shares.
You will need to have an
account with a full-service
or discount securities broker
in order to buy TenCent shares.
There is perceived risk of buying stocks
over the counter because
it is the exchange
for penny stocks and
those are not qualified
to be listed on the major
exchanges in the U.S.
But that doesn't make
investing in Tencent risky.
It is a proven company
with solid track records,
and TenCent being traded over the counter
is the least of my concerns.
You may have heard of Nintendo,
the infamous game maker;
its stock is being traded
over the counter, too.
Did that make you feel better?
You can also gain exposure to
TenCent through mutual funds
and exchange traded funds, ETFs,
which is generally a safer choice.
This will also provide diversification
as well in case you don't want to put
all eggs in one basket.
I'll provide links to
them in the description
below for you to explore.
In summary, while WeChat
is the most well-known
in its portfolio, Tencent has quietly
and aggressively expanded
into many fast-growing tech
and non-tech areas including
artificial intelligence,
cloud computing, and online entertainment.
Its solid revenue growth rate,
strong financial resources,
and diverse portfolio will
position Tencent for a new high.
Even though Tencent's
shares are not cheap,
the price is still below fair value,
and there is relatively
large upside potential.
To me, it's a buy.
That's it for today video, I
hope you find it informative.
I will see you on the next video.
And, if you can't wait,
check out other videos
on my channel.
Bye now.
(upbeat music)
