Chinese Tech is Buying Its Own

Whatever your opinion on the Chinese shift toward tighter regulation over private companies or its handling of Evergrande and associated ills, there is one indisputable aspect - some tech companies see value in their own shares.

None is more critical than Tencent, the 800 lb gorilla in Chinese tech.

And the company has been on an absolute tear over the past 30 days. Since August 18, the company has announced (and completed) share buybacks on 23 separate days, amounting to more than 4.6 million shares. That's the most amount of buybacks since the summer of 2013.

The company has been an extremely savvy buyer of its own shares. The table below shows every time when the firm bought back more than an aggregate of 2 million shares over 30 days.

The Risk/Reward Table shows that a few of them saw heavy drawdowns over the short-term (hey, nobody's timing is perfect), with two of them losing more than 10% within weeks.

Over the next 6-12 months, the gains in Tencent were remarkable, with a median of over 100%. The risk/reward skew is the most lopsided I can remember in more than 20 years of analysis.

Clearly, there are structural and fundamental risks to this company and Chinese tech in general. Not even "Chinese" tech specifically, perhaps just tech in general with their gearing toward interest rates and risks of regulatory pushback. That's not our area. Based purely on this particular company's savvy with its capital stock, it's an interesting opportunity.