Potential Multibaggers Pt.3: Momo Has Mojo

Jul. 20, 2017 7:07 AM ETHello Group Inc. (MOMO)BABA, META33 Comments


  • Momo is a Chinese social network platform concentrating on live mobile video.
  • The EPS growth rate for the next five years is estimated at 50% and that with a forward P/E of just 19.
  • The company lives up to all the requirements that I ask from growth stocks and beats earnings with 54% on average.
  • This company certainly is a potential multibagger.

In my article about why you should have growth stocks in your portfolio, I wrote about the foundations of my growth stocks strategy, which is more qualitative than quantitative.

In the first article that I dedicated to growth stocks that could go up a lot in the next years (Potential multibaggers pt.1), I looked at Shopify (NYSE:SHOP). In the second part of this series, (Potential multibaggers pt.2), I shone a light on Shopify's Chinese counterpart: Baozun (NASDAQ:BZUN). For the third installment of this series, we stay in booming China with the social app company Momo Inc. (NASDAQ:MOMO).

Momo made its IPO on the Nasdaq on November 7, 2014. Its main product is a mobile-based social networking platform, based on location and interests. Basically, this means that you can meet people who are near you and/or have the same interests as you. But it also has a stand-alone video application called Hani. The social app is growing quickly.

On the last conference call (in May 2017), the company declared that the total MAUs (Monthly Active Users) on the Momo platform reached 85.2 million for the 1st quarter of 2017, compared with 72.3 million the year before and 4.1 million more than the previous quarter. That is almost an 18% YoY growth. And the company knows how to monetize its users.

But before we go into more details about the company and the stock, I want to talk about the macroeconomics of Chinese investments. I did this too for Baozun, so if you still remember this, you can scroll a bit further down.

A lot of investors are afraid of Chinese stocks because of fraud and unreliability, but I think that you throw out the baby with the bathwater then. There is an enormous potential in China, with its population of almost 1.4 billion people

This article was written by

From Growth to Value profile picture
Potential Multibagger helps you find multibaggers early on.

I am a 46-year old investor with a long-term perspective and that means I mainly think about the future when I invest. I try to uncover multibaggers early on. Picks include Shopify ($7.78), Crowdstrike ($98), The Trade Desk ($19.5), Cloudflare ($39) etc.

The strategy is simple but not easy: find disruptors that have a very high quality and hold them for a very long period. I try to identify stocks that have the potential to go up 1,000% and more over the next 10 years. I do deep research for the stocks that I pick to know if the quality is high indeed. 

I do not care about what my selection of stocks will do next year, but what the result will be over the long term. To paraphrase Warren Buffett: "You should only have stocks that you would feel comfortable having if the stock market closed up for 10 years."

I appreciate your comments because I believe I can learn a lot from your feedback and I believe in the wisdom of crowds.

Disclosure: I am/we are long MOMO, FB, BABA, BZUN, SHOP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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