Is Luckin making a come-back?

Yes, we are talking about the infamous Luckin Coffee based in China.

It was the darling of Wall St and making new highs every week.  I got in early and my very timely trip to Asia (Hong Kong and Singapore) in January of 2020 made me realize how serious Covid was so I exited around $48.  It was very fortunate since the stock tanked after their accounting scandal.  People got fired.  They were delisted.  Got a lawsuit and settled.  Stock tanked but this is what happened since.

11X return in 2 years.

Yes, you read that correctly.  11x in 2 years.  That’s a massive return.  Yes, it was risky but it was worth the bet.  Why?  We believed in China-business model.  Let me explain that to you in a simple term.

• Visa ($V) valued at $405 billion right now was blocked from entering China.  China created UnionPay to compete with Visa, Mastercard and Amex.  How big is it?  We don’t know since it’s a private company but they are now expanding their foot print globally.
• Google (GOOGL) valued at $1.45 trillion right now was blocked from doing business in China.  What did China do?  Created Baidu ($BIDU) worth $50 billion
• Amazon ($AMZN)…the same story.  Chinese version, Alibaba ($BABA) worth $284 billion
• Facebook ($META)…WeChat owned by Tencent Holdings

You got the picture?  They want to create Chinese version of successful companies.  And who will benefit the most in coffee business in China?  Luckin Coffee ($LKNCY).  Not Starbucks

After a humiliating incident, they have cleaned up their books and now growing steadily.  They recently announced that they have finally surpassed Starbucks (SBUX) in the total number outlets.  4th quarter grow 81% to $381 million.  They have pivoted to a franchise-model putting the bulk of the cost of expansion on someone else.  Finally, they are looking to relist on US stock exchange.

So we are very optimistic in their growth prospect and they will thrive again despite some or many being skeptical of them.  We have been buying them below $2 after it tanked and we are still accumulating whenever there is a dip.  So take a look and see if this makes sense for you.  And again, do your own DD before you make any investment decisions.