The Craigslist of China
For my stock pick today, I’m turning to a Chinese stock that was featured in the April 6 issue of Cabot Top Ten Trader, a weekly advisory that analyzes the 10 strongest stocks of the previous week, screening them for price performance, liquidity, fundamentals and story. Top Ten provides aggressive growth investors with a priceless picture of what’s working in the market, and includes buy ranges, suggested stops and a write-up of why the stock is strong and what its chart is doing. It’s not an advisory for a casual investor who wants a fully advised portfolio, but it’s the best early warning system around for growth stocks.
Here’s a chart of what the stock, 58.com (WUBA), has been doing recently.
Here’s what Top Ten had to say about the stock on April 6: (click on the image to make it larger)
For further updates on WUBA and additional momentum stocks, take a trial subscription to Cabot Top Ten Trader. The advisory features a wide array of stocks and sectors you can benefit from in as little as 30 days. Our most recent issue features a diverse mix of strong stocks, including a recent IPO that has the opportunity to bring you double-digit returns in the weeks to come.
58.com (WUBA): Helping businesses and customers find each otherBy Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 7/8/14 Sign up for Cabot Wealth Advisory—it's free!
My stock pick for this issue is the Chinese online marketplace 58.com (WUBA) that’s helping businesses and customers find each other in the localized Chinese economy. Here’s what Chief Analyst Mike Cintolo had to say about it in the most-recent issue of Cabot Top Ten Trader, an advisory that looks at the 10 strongest stocks of the previous week.
“Why the Strength
With the IPO of Alibaba now imminent, investors are enthusiastic about stocks that give them access to the fragmented Chinese consumer landscape, and 58.com has caught their eye. The company is an online marketplace that gives local merchants (China is virtually without big retail chains) a place to meet customers and customers a place to shop for (and get information on) housing, jobs, automobiles, second-hand goods, pets, tickets and yellow pages information. Beijing-based 58.com was founded in 2005 and has many similarities with Craigslist and a few with eBay. But it’s really a unique hybrid, a Chinese response to a problem of getting merchants and consumers together. It’s worth noting that Tencent Holdings, a Chinese online giant, has grabbed a nearly 20% stake in 58.com in return for an investment of $736 million. This alliance will give 58.com potential access to Tencent’s hugely popular WeChat platform, which could substantially boost 58.com’s mobile device penetration. 58.com enjoyed 67% revenue growth in 2013 and has booked four profitable quarters in a row leading to EPS of 25 cents in 2013, which is forecast to rise to 46 cents per share in 2014. Add in the continuing rumors that 58.com is an attractive takeover candidate and you have a nicely positioned Chinese online commerce play.
WUBA (literally “five eight” in Chinese) came public in October 2013 at 17, but has never traded under 21. The stock advanced and corrected up to 58 in March, then began a nicely shaped cup correction that has likely ended with a handle at around 55 over the last week. News of the Tencent buy-in caused a high-volume spike in WUBA on June 26 and 27 and last week’s action represents a consolidation of those gains. WUBA looks like a good buy anywhere under 54. The stock’s 25-day moving average is at 46.5, and that’s a pretty good stop.”
Personally, I like to confine my stock analysis to Story, Number and Chart, which I call the SNaC approach. I'll write more about it in a future issue. But I think this writeup of 58.com shows how much of a stock's strength and appeal can be expressed in just a few paragraphs.
To get additional growth stock picks delivered to your inbox every week, consider taking a risk free trial subscription to Cabot Top Ten Trader. Each week, Mike Cintolo looks for strong momentum stocks which are ready for advance. For details, click here.
| 58.com (WUBA)
The North American International Business Center, Block E
Beijing, 100101 China
86 10 5139 5858
|Index Membership: N/A
Industry: Internet Information Providers
Full Time Employees: 5,653