Alibaba, a Chinese e-commerce company, closed its first day on market at a $233 billion market value – a record breaking IPO. 

Despite this, there are five reasons why Warren Buffett, the greatest investor of the century, would not invest in the company.

First, it lacks global. Although it is extremely popular in China, it is questionable whether it will be able to replicate this in America and other markets.

Secondly, its business model will not be difficult to replicate for companies based in countries where relationships with the government aren’t as strong.

Also, its appeal to consumers does not tap elemental forces, meaning that it will be hard to keep first time buyers coming back.

Furthermore, technology could erode its moat. This means that Alibaba will have to work very hard to update their mobile shopping technology to compete with Amazon and Ebay.

Finally, its high margins are a competitor’s opportunity. Alibaba has a 57% operating margin. If Amazon lowers its advertising prices, it could severely cut Alibaba’s revenues.

The purpose of this article is clear to me; no matter how good a particular investment opportunity may seem, guaranteed returns on investment are a myth in today’s economy.

Source:

http://www.forbes.com/sites/petercohan/2014/09/19/5-reasons-not-to-invest-in-alibaba/