Tencent Reminds Twitchy Traders Why Buy-and-Hold Gained 46,871%

(Bloomberg) -- Tencent Holdings Ltd. is silencing the skeptics.

The tech giant had lost almost $100 billion in value in recent months as investors braced for a squeeze from increased spending and investments. Instead, the company delivered record quarterly profit and better-than-expected margins. The reaction: the shares rose 3.7 percent in Hong Kong on Thursday for their biggest rally in five months.

History shows that riding out declines in the Chinese Internet company has been a winning strategy. Buy-and-hold has been the only way to go on the stock, returning some 46,871 percent to shareholders, excluding dividends, in the 14 years since it first listed in Hong Kong, according to backtesting data compiled by Bloomberg. No other approach even comes close, with technical trading strategies based on moving averages and relative strength losing money for investors. The results are similar over the past one and three years.

Tencent Reminds Twitchy Traders Why Buy-and-Hold Gained 46,871%

That helps explain why it’s remained one of the world’s most loved stocks by analysts, with none recommending selling for more than two years. Goldman Sachs Group Inc., Citigroup Inc. and Macquarie Group all boosted their 12-month target prices on Tencent’s shares after its first quarter report.

Options traders had prepared for a relief rebound, sending the cost of hedging against further losses to the lowest level of the year, while mainland investors also turned bullish -- they were net buyers of the stock on Wednesday through a link with Hong Kong for the first time in five days.

©2018 Bloomberg L.P.