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Shares of Altaba (NASDAQ: AABA), gained 80.6% in 2017, according to data from S&P Global Market Intelligence. What remains of the old Yahoo! business, following Verizon's (NYSE: VZ) buyout of most of that company's assets, rode the coattails of a surging Alibaba (NYSE: BABA) last year.
Altaba is in fact designed to be a proxy for investing in Alibaba directly. Yahoo! started its 15% ownership of Alibaba years before the Chinese e-commerce giant joined the public market, and found it worthwhile to keep that mojo running when Verizon picked up Yahoo!'s actual business operations. Besides a $72.8 billion stake in Alibaba, Altaba also owns shares worth $9.6 billion of former subsidiary Yahoo Japan, plus a smattering of smaller holdings. But the Alibaba interest represents 88% of Altaba's total net asset value, so the two stocks are joined at the hip.
And Alibaba had a banner year in 2017 with a 96.4% share-price jump, taking Altaba along for the ride.
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Investors who own Altaba instead of Alibaba are either holdovers from the Yahoo! days who simply haven't done anything with their reformed stock holdings or they are value-minded growth investors who see the stock selling at a 30% discount to the value of its actual assets.
That large discount stems from the enormous tax bill Altaba would face if it attempted to bring its China-based Alibaba gains back to U.S. soil under current tax rules. If the company can find workarounds for that issue, or the rules change to a more favorable model somewhere down the line, early Altaba investors should be able to pocket some of that price difference.
That's a very long-term bet, however. It's not easy to find international tax loopholes large enough to take home a cool $73 billion in Alibaba holdings, and that asset is still growing at a skyrocketing pace. I'm quite content to own Alibaba shares instead, but both stocks should add plenty of value to your portfolio over the long run.
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