 Good day, fellow investors. A company that is strongly exposed to the internet of things, it's the largest venture capitalist in the world. Can it also be a value investment? Well, it can. And in this video, we are going to explain the value investment part of SoftBank, how it is undervalued, what is the huge potential upside, and what is the downside, what is the price you have to pay to get exposure to all that potential upside coming from all the things in the cloud. And if those things in the cloud don't happen, what do you fall onto? What is the risk? And the risk limit is actually Alibaba, Sprint, the telecom they have in Japan, ARM, the chip maker, etc. So there is a lot of upside, a lot of volatility, a lot of talk about WeWorks, about SoftBank Vision Fund, Saudi Arabia funding it, blah, blah, blah. And then there is businesses, usually on the other side, that the market might be priceling very wrongly and therefore it's a value investment. Let's start with SoftBank. We'll discuss the value, the margin of safety, the growth, the strategy, the risks a little bit on individual companies, WeWorks, the plan of Masayoshi-san, the founder of SoftBank for the next 20 years. And then you will see how that fits your portfolio. I expect a lot of volatility. So I also made a small investment strategy to put this, how might fit your portfolio with low risk and high reward. And you'll see whether that fits you or not and whether you have a long enough investment horizon to invest in this. Let's start. So Masayoshi-san, the founder, invested 20 million in Alibaba in 2000 for a 34% stake. He sold some of it recently, but still owns 25% of Baba. So that's the value. SoftBank owns 25% of Alibaba. And that is what you have to account on when buying such a company. Of course, they paid 20 million for the stake. So there is gain taxes that they have to pay. I think it's 30% in Japan. So you have to discount for that if they don't hold forever and enjoy the dividends Baba might pay one day. But that's actually it. If we look at it more in detail, then you see shareholder value of all the things that are traded listed because all the most companies SoftBank owns are listed is 10,640 yen. We have equity value of holdings and the net that the company has on the corporate level, on the holding level. So the value per share is 10,640. Now if I take all the 10,640 and account that as profits, then we have to pay a 30% profit gain tax in Japan. So the value of the company after future possible taxes that might or might not would be 7,429 yen. The stock price is in the 4,100, 4,200 depending on the day you are looking at. Let me give you a more detailed description of the value. So Alibaba value per share is 5,800 yen. The stock price is much lower, as I said. Even if you account for 30% gain tax on Alibaba, you get to the current stock price. So if you buy SoftBank, you get Baba. That's it. If everything else, I don't know, just pays for the debt or manages debt or is valued at zero, practically you get Baba after tax. Everything else is pure upside. Everything else includes SoftBank Corporation, the Japanese arm of the company, the telecom there and Yahoo Japan, Sprint, the telecom in the United States, ARM, the chip maker they acquired a few years ago that makes chips for most of your smartphones, etc. SoftBank Vision Fund, the $100 billion fund that they invest in venture, new ventures and then other values. So this is SoftBank and the key here is, okay, this is a holding company. Holding companies always have a discount because you never know what will the owner, Masayoshi-san, decide to do with the money. If he takes sales Alibaba and plows down more money into WeWorks, of course the two businesses are not comparable and if he does that, well, that's a risk and that is what our investors are looking. But then, again, you have to look, okay, what is he doing with that money? What's the investment strategy? We know that all of these companies Uber, DD, WeWork, Payton, I don't know, we'll discuss them later how many there are. 90% will go bust, 5% will do okay, 5% will do great and we'll become the next dominators in the environment and those 5% that do great will pay off for all the losses. That's something you have to understand when investing in SoftBank. The market, investment bankers, etc., who have been taught at Harvard, they think like this, they can't see this, let's say, distribution of risk and reward. You lose everything but the upside is unlimited. That's the key when it comes to SoftBank and that's the key to understand when it comes to you investing in this. Of course, there are some limits Alibaba and all the other holdings that are good companies that will not probably go anywhere in the next 10-20 years. Well, they'll go somewhere, probably only up. So, let's look at the stock price. We see over the last 5 years Alibaba is orange here, SoftBank is black. Alibaba outperformed SoftBank even if it practically is the same stock. So, over the last few years SoftBank struggled to keep performance with Babba. We see 2014, 15, 16, it was trading very closely and then the divergence started. And especially there is a divergence now over the last month too, SoftBank lost 20-24% due to WeWork, due to all the commotion going on with WeWork and what will the management do there. So, the value is Alibaba but it's not trading at the value. So, if Alibaba has a market capitalization of 450 billion, looking at the discount, I can get Alibaba for 315 billion by just buying SoftBank. So, that is the value there. Of course, at the same price if I calculate for the potential future profit tax gain and then I am at even everything else is for free. So, if I want to all own Babba and all that other mumbo-jumbo exposure to all those other companies, then SoftBank might be something to look at. Let's look at what else is there. So, we have SoftBank corporations that owns part of Yahoo Japan and Telecom there. It pays a 5% dividend yield that is enough for SoftBank to manage its debt. It looks like a stable business. We have mobile. We have Yahoo distribution broadband and all other things that such Telecom and Internet provider do. They are trying to diversify their sources of revenue. Their growth strategy is of course 5G, Yahoo Japan and then of course implement the artificial intelligence that SoftBank plans to grow on over the next 20 years. It has a good credit trading in Japan. It will probably not go bust. It will keep feeding SoftBank with some money to grow and work on other things. Then ARM Holdings, they did pay $42 billion for this company, which is a huge amount in 2016 for the Internet of Things chip maker. But if we really will be living in an Internet of Things world, then it will be a bargain. So, that's the bet Masayoshi took. So, they have really high penetration into smartphones. Makers pay royalties for them. They're increasing their sales. They're increasing their markets. Their plan is to increase their penetration even more into cars, computing, cloud computing, data centers, networking equipment, vehicles. They expect that over the next 10 years cars will have five times the amount of chips they have now. They will implement all of this to enable SoftBank also to grow. So, a very, very interesting play to position oneself in this environment. In summary, this is SoftBank. We have the value of Alibaba, SoftBank Corporation in Japan, Sprint, ARM, others Yahoo Japan before the consolidation. And then the SoftBank Vision Fund. This is the SoftBank Vision Fund. Of course, some of these guys are already gone. I think the CEO of Uber, the CEO of WeWork, but then there is Grab, Tokopedia, Pay, TM, Coupang in Korea and all those other businesses that you never know what will happen with them. I think that 80-90% will be sold for nothing, go bankrupt, be worthless. But 10% of these 82 businesses, I think there are, will do wonders and that is what you are investing in. And the media will always pound on those that are not working as planned because that's the job of the media. However, the stock price is influenced by the media and this is what creates opportunity. It's really positioning their cells into transportation, logistics, health tech, real estate, enterprise, consumer, oil in India, the hotel chain from India, 10 billion valuation, they have a 45% stake, cruise 19 billion valuation, pay them in India 19% stake on an 18 billion valuation. But some of this will do good, some won't. And we come there to WeWork and we see that all the headlines, Vision Fund portfolio companies slide, IPO changes in valuations. But let's go back to the summary. Look at the Softbank Vision Fund. It's just what, 10, 15% of the value of the holdings now. So this is an investment. The Vision Fund is a 20-year horizon investment, not now, but the market simply takes the news and then sells because it might go lower. It might go lower. On the other hand, the Softbank Vision Fund is the largest venture capital fund in the world, but then, okay, damage from Uber. I love such headlines. So from Uber, WeWork could exceed 5 billion. So of course it could exceed 5 billion, but nobody looks at this. Look at the market cap. The company went from 97 million to 47 billion valuation. Of course, Softbank misses somewhere it wins, somewhere it misses. Will those companies become profitable? Some will, some will not. And that's the play. The upside is unlimited. The downside, you can only lose what you invest in. And WeWork is just 10% of the Vision Fund. Keep that in mind. Other 82 portfolio companies are there. So Softbank is 10% of the Vision Fund, 10 billion invested in WeWorks. If they invest a little bit more, Softbank owns 36% of the Vision Fund. And that's just 3-4 billion, which would be the loss. Some IPO doing better, some IPO doing less better. And you recoup that in a few years. But that's also the main risk. If Softbank plays on those games and they don't reach profitability, you never know when will these Internet of Things thing explode. Will it be in 2022? Will it be in 2027? Will it be in 2032? If we look at the Internet of Things, everybody was so excited about the Internet in 1999, but then it actually took another 15 years for really the Internet to gain traction for Amazon to start dominating, for Google to do everything that they are doing now. Alibaba, etc. So it really took 10 years off from the first boom, took 10 years of slow down time, just getting traction and then it really exploded over the last decade. So also that's another uncertainty. You never know when it will explode, how profitable it will be and how much money will have Softbank to add, add, add over the next 10 years. And that's also a big risk because if they start selling Baba to invest in all these venture things that don't get profitable, that don't turn a profit soon, then that's the risk and that might be the reason for the holding discount. So you have to see how does this imagination, how does this upside fit your portfolio in relation to the risks? The management is extremely positive about what's going to happen. So if we look at what the management says, they are planning 50% growth per year and grow the market cap to 200 trillion yen from the current 10 trillion, so 20x over the next 20 years. So if they will be right, if you invest 10,000 now, you will have 200,000 in 20 years. Let's hope they are right. However, on the Softbank vision fund, if they grow 45%, the shareholder value there over the next 10 years and then 26%, they expect to grow it 200 times. So that would be even a larger number of growth for the future compared to just Softbank. So this sounds crazy, this was presented by Masayoshi-san in an investor presentation early this year and it's similar to what he did 15 years ago when the company was losing billions of yen, hundreds of billions of yen. He said that his company's profits will be measured in trillions of yen one day and that's exactly what he achieved. So when it comes to the investing strategy, you have to first see, okay, is this something I want in my portfolio? Do I accept the volatility? It will be crazy volatile and we don't know what's the outcome. We don't know whether Masayoshi-san will be able to make it or we'll see that artificial intelligence is so good that the competition is so high that nothing can be profitable. That's also a risk. So that's something you have to keep in mind and then you have to, you can say, okay, I'll invest now one part if it drops 33%, I'll invest another and then if it drops 33% again, I'll invest more and then you can balance that, you can manage that on the volatility and build your core position over the long term. That's a strategy I would do if I would invest in Softbank. I'm doing also this video to settle my thoughts and I don't know, I have put it on my covered stock list on my stock market research platform. I'm really interested in Alibaba to get exposure to that at a lower entry point and then have all this upside but I'm also wary that this potential upside might be downside if they drag more money, more good money after bad money. So that's something you have to see how it fits your investment scenario. I don't know what will happen. Actually, nobody knows what will happen with Softbank. So don't look for answers. You have the upside, you have the downside, what will happen? We will see, I'm sure there will be volatility and then you have to see whether your horizon is 20 years to wait for everything to happen, to wait it out and whether these venture companies have really the potential to bring Softbank to that 200 times level or 20 times level for just the company, not the vision fund. If you like this kind of investment analysis where we look at the downside versus the upside, please check my stock market research platform. This is what I do all time. I research businesses and then try to understand what's the risk, what's the reward. I'm a little bit more skewed to value, to certainty in relation to Softbank but it costs nothing to watch, to learn and see where it goes. I'll be covering the stock also on my platform. So check my platform if you really wish to see what we do in detail. Thank you. Looking forward to your comments on Softbank. We have hit 50,000 subscribers. So in two days we'll make a celebration video. We'll give some books away. So be sure to subscribe and click that notification bell. I'll see you in the next video.