Tag: Investing

In recent 2 weeks, US stocks especially tech/QQQ went straight up, before the AVGO disappointing earnings.

There is an unusual capital inflow that accelerated.

It’s not just FOMO after fabulous run in April and May.

China’s recent crackdown also played an role – as Chinese investors investing overseas fear that they can’t add/buy for the next two years, they rushed to buy a lot!

And they are more likely to chase high beta stocks, leveraged ETFs.

That’s a problem in the short run.

And a correction should normalize this.

These investors can still sell according to rules; they can also buy/add when being abroad.

Every five years, China will have a new Politburo Standing Committee.

There are 7 members now, which are considered the most politically powerful people in China.

Not all members are new, some can stay for 2-3 term.

But the fight for becoming a new standing committee member can be quite intense.

There can be ripple effects across other areas in China.

Stock market can be quite sensitive to unknowns and turbulence.

To avoid uncertainties, it’s wise to stay away from it.

To compensate for staying on the sideline for about one year, the previous year can be quite a good year.

That seems to the case for the last 2 terms – 2017 and 2022 were the year of new committee selection. The “fight” could start in 2016 and 2021. Thus the “good” years were 2015 and 2020.

The next term is 2027. The “fight” could start in 2026 and 2025 was the good year. That seems to be the case so far.

In a previous post, I said unpredictability is what Pop Mart investors must shoulder, but is there any number that can make investors slightly more comfortable?

Let’s try Labubu adjusted P/E and we need Labubu adjusted earnings.

Labubu (The Monsters IP from Pop Mart) revenue was over 14 billion rmb in 2025.

The other “good” IPs were about 3 billion rmb revenue.

We can assume there is 10 billion “extra” revenue that Labubu is earnings.

We can also assume Pop Mart’s marginal operating profit margin is 50%. Then the “extra” operating profit is ~5 billion rmb.

Subtract that from 2025 operating income will give you about 12bn rmb in Labubu adjusted operating profit.

With 25% tax rate, Labubu adjusted earnings is about 9bn rmb.

At 150 HKD per share, Pop Mart is at ~20x Labubu adjusted P/E.

Pop Mart stock plunged after earnings – down 23% on Wednesday and down 10% on Thursday.

Pop Mart’s forecast of 20% or so rev growth in 2026 is lower than what is expected and is a sharp decline after 185% growth in revenue in 2025.

Labubu is still one of the hottest fashion toy IP worldwide with no competitors I think.

However, investors can’t reliably forecast future rev and thus cash flows of Pop Mart as nobody knows whether Labubu can sustain its mojo / for how long and how far.

Unpredictability is usually a negative thing, but people disregarded it as a risk when Labubu was in rapid growth mode. The “upside” unpredictability blinds investors – they liked it actually.

Now if you really want to be an investor in Pop Mart, you need to be comfortable with this inherent unpredictability.

One way to think about this is that Pop Mart is ultimately a very good channel like Tencent. Whatever it incubates and sells, its stores will sell them well. Pop Mart stores are the product of Pop Mart, alongside the IPs like Labubu.

However, to say Pop Mart stores is like WeChat is too much a compliment for Pop Mart so far. Network effect that is so strong and unique that WeChat really doesn’t have a competitor.