Take Alibaba as an example, a Chinese technology company we have owned since 2021. To be candid, this investment has not been a successful one for us so far. Our initial purchase was made at nearly US$235 per share, while today the stock trades around US$175.
Over nearly four years as an Alibaba shareholder, we have observed that our clients fall into two distinct camps when it comes to their perception of the stock.
On one side are those who regularly ask why we continue to hold our position in the Chinese company. These shareholders, often invested since our initial purchase at US$235, have lived through the decline to US$75 only a few months ago. Understandably, every time they look at their portfolios, they see a loss. Even now, with the stock above US$175, many would prefer that we sell and recover at least part of their capital.
On the other side are clients who joined COTE 100 more recently, purchasing Alibaba shares closer to US$100. For these investors, Alibaba has been a significant winner, generating an attractive return. Some even wish to increase their allocation. In fact, Alibaba has probably been our best performing holding over the past two years, having appreciated by more than 100% since the beginning of 2025.
How is it possible that two shareholders of the same company hold such opposing views? After all, they both own shares in the exact same business, with the same balance sheet, management team, historical performance, and long-term prospects. The only difference lies in their initial purchase price. It is this acquisition cost that so profoundly shapes their perception of the stock.
One recent discussion with a long-time client illustrates the point. Like many, he bought his first Alibaba shares in 2021 at roughly US$235. As the stock declined, we agreed at the end of 2023 to sell to realize a tax loss in his portfolio. The shares were later repurchased, giving him a new cost basis of about US$80. When we spoke recently, he expressed great satisfaction with Alibaba’s performance. Would his outlook have been as positive had his cost basis remained US$235?
This example highlights a powerful and widespread cognitive bias among investors: anchoring. At COTE 100, we strive to look beyond the initial purchase price and instead focus on what truly matters — the company’s long-term financial progress and its potential for appreciation from current levels.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
_______
This article is also published on 
(in French)
