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I think there shall be a thread targeting the high flying Chinese internet companies. More specifically, sina, ntes and sohu. China is also an internet company but it is based in Hong Kong (I believe). I had never been so sure of any companies before, until now. I had been keeping track of these three companies ever since they went public. I still remember when these companies are less than 1 dollars and on the verge of been delisted. But it is largely not due to the companies' fault, rather they just get listed right before the internet bubble burst. When 95% of other internet startup fell, the manager of these three companies are able to remake their companies during the worst environment any companies can ever imaging. Now, Sohu has the best following amount the group matter the most, the young and the fashionable. Ntes has the biggest on-line gaming market share. Sina has the largest online-ad and wireless market. All three companies are in black and sky is the limit. The management of these three companies had certainly earned their mantle. I think it is the most important part in picking stocks. Pro: - great management. They had certainly proved themselves in the worst possible environment. - Insider holding. When these great managers make their billions, I am going to make my millions by hitching a nice ride with them. - Souring Chinese economy. As the economies grows, people want to have more entertainment after the basic needs are met. Internet will be one of the most obvious choice people use and these three companies are the best positioned. - One child policy. Unlike their frugal parents, today's youth in China are spoiled and progressive. Internet are the fashion and will stay as the fashion in the forseeable future. - Currency windfall. I believe China's currency are grossly undervalued. As China grow at 8 percent while US grows at 4 percent (in a good year), China's currency is going to be more undervalued as time goes by. But it is not going to last forever, China will have to float her currency in 5 years. When it comes, it is going to bonus on the price of these stocks. - Government policy. Chinese government is certainly promoting the use of internet. Yet on the other hand, she is also filtering nd censuring the internet at the same time. These three companies had shown to be adept at benefiting from the government promotion of internet while not getting hurt by the government's attempt censureship. - Protectionism. Even though China is in WTO, there will be some hidden protection measure against the foreign boys. No matter how much yahoo, ebay, or amazon toe the government line, I think the bureacrats in Beijing still prefer dealing with the homeboys. Con: - Low online ad. Or is this an advantage? There is no doubt that online ad in China will sour. But still, there is a possibility that China will be different. - Middleman role. Currently, a lot of revenue of these three companies are derived thru. telecom companies. That is, the consumer use their service but pay to the Chinese telecom carriers. When time goes bad, the middle man are usually the first one to get squeezed. I think the best insurance policy is the quality of the management team. No matter how much the Chinese telecom carrier squeeze these three companies, it is going to be nothing compare to the burst of internet bubble. These three companies had certainly demostrated that they can remake themselves in no time. - Foreign competition. I have no doubt yahoo, ebay, amoung others are eyeing Chinese market at this moment. But as demonstrated by PC makers Legend, and greatwall, sometimes homeboys can come out ahead against the billions by HP and Dell. In addition, government policy and protectionism will favor these three companies. In summary, I think these three companies have great challenges ahead of them. But they had met with greater challenge and came out winners. I truely believe in one or two of the three will enventually be the size of yahoo or amazon. By then, I can retire early. As you can see, I am in love of these three companies. It is definitely a no-no in picking stocks. But I just can't convince myself NOT to love these three stocks. Today is a big down day for these three stocks. I think they are over-valued in the short term. Hopefully, if they come down to 25 dollars, I will add more to my existing portforlio. Any contribution to this thread will be greatly appreciated. Especially the negative one as long as it is backed up by reason. | ||||||||||||||
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