Shares of Altaba (NASDAQ: AABA) gained 10.1% in May of 2018, according to data from S&P Global Market Intelligence. As always, the focused investment fund moved in near-perfect lockstep with its largest holding, Chinese e-commerce giant Alibaba (NYSE: BABA), whose shares rose 10.9% over the same period.
As a reminder, Alibaba’s May gains were based on a strong fourth-quarter report. The company crushed Wall Street’s estimates across the board and outlined an ambitious plan for international growth in the long term. Since roughly 80% of Altaba’s investment portfolio is locked into its Alibaba shares, Altaba simply rode Alibaba’s coattails as usual.
The company formerly known as Yahoo! has been holding on to an Alibaba portfolio that was created long before that company hit the public markets in 2014, never buying more shares or selling a single stub. That is changing in May, as Altaba launched a tender offer to unload as much as 25% of its Alibaba holdings. The company aims to maximize the return on Alibaba for its shareholders, eventually giving it all away in the form of dividends and share buybacks.
Until that plan runs its course, Altaba remains an alternative method for investing in Alibaba on a fairly direct basis. If you like Alibaba’s chances of beating the market, Altaba should look good, too. It gets even better if you expect the company to eventually find a way to sidestep the tax implications of its hugely successful Alibaba investment. So it’s no surprise at all to see Altaba shares surging when Alibaba reported a great slate of fourth-quarter results.
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