China Edu (CEDU)
By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory, 3/2/09 Sign up for free Cabot Wealth Advisory e-newsletter
Today's investing idea is a small Chinese company, for two big reasons.
First, it seems to me that the world's crumbling debt structure is bringing down a lot of elephant-sized companies, and I know from experience that healing those companies will take time. Small, well-capitalized companies, as I mentioned above, are more attractive today.
Second, China will undoubtedly climb out of this recession faster than the U.S., so young companies in China will likely be some of the fastest out of the starting gate. In fact, some are already running.
One of these is ChinaEdu Corporation (CEDU), which was profiled by Paul Goodwin, editor of Cabot China & Emerging Markets Report, in a recent issue.
Here's some of what Paul wrote:
"ChinaEdu provides services that support the online degree programs of Chinese universities. As online programs become more popular, business has expanded quickly. Founded in 1999, ChinaEdu works primarily on program development, technology, marketing, student support and finance for the 11 universities with which it has strategic relationships. In 2005, the company began direct operation of private primary and secondary schools and online interactive tutoring and test prep services. The company cites a World Bank study indicating that about 260 million of China's 1.3 billion people are actually students at some level in the educational system. That's a significant base for a thriving support business."
When Paul wrote that, back in January, the stock was "stuck at 5, trading at a minuscule average daily volume of 26,000 shares." Since then it's topped 6 1/2 and pulled back to build a new base at 6, which is encouraging. On the other hand, average daily trading volume has shrunk to 18,000 shares, which increases the risk. Technically, the stock has too much risk today for most investors, in part because the broad market is weak, too. But I feel good about education stocks in the long run so I mention it today to give you a stock to consider when the market turns positive.
Long-term, the company's future is bright. Revenues grew 37% in the latest quarter and the after-tax profit margin was a solid 9%. If this were a healthy bull market, the stock would be an attractive speculation for experienced small-stock investors. Today, it's simply a stock to keep an eye on.
Editor's Note: Cabot China & Emerging Markets Report was the top performer of all investment advisory newsletters in both 2006 and 2007, bringing subscribers who followed Paul's advice gains of 78.6% and 74.1%. For most of the past year, however, Paul's subscribers have been heavy in cash, and they remain there today, preserving their profits and capital. But that doesn't mean they're idle. With every new issue of Cabot China & Emerging Markets Report, subscribers are kept up to date on the most likely leaders of the next bull market, a bull market that will start, as they always do, when it's least expected. If you'd like to own the top-performing Chinese stocks as they rocket ahead in the next bull market, I strong recommend that you join them. To get started with a no-risk trial subscription, simply click here.
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
|ChinaEdu Corporation (CEDU)
4th Floor A Block Gehua Building
No 1 Qinglong Hutong Dongcheng District
Beijing, 100007 China
86 10 8418 6655
|Index Membership: N/A |
Industry: Education & Training Services
Full Time Employees: 1,603