By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 2/10/14 Sign up for Cabot Wealth Advisory—it's free!
LightInTheBox Holding (LITB) is the Top Pick for Disruptive Stocks in 2014 by Paul Goodwin, chief analyst of Cabot China & Emerging Markets Report, so I’ll start by copying what Paul wrote just over a month ago.
“There is no rational way to figure out which emerging market stock will come out of top a year from now. Emerging markets are just too volatile for long-term projections. But I’m picking a stock based almost entirely on its story, which I think has the potential to be huge.
“The company is LightInTheBox Holding (LITB), and it’s a Chinese company that operates a global online retail site. LightInTheBox offers customers around the world a chance to buy customized products (like wedding gowns) direct from factories at low prices. The company’s websites are available in 27 languages and are reachable by 80% of global Internet users.
“LightInTheBox has been growing revenue fast (98% growth in 2011, 72% in 2012) and turned a profit in Q4 2012 and Q1 2013.
“The shares have been in a downtrend since the company’s August earnings report disappointed traders, falling from a high of $23 to around $8 in recent trading.
"LightInTheBox announced in December a share repurchase program of up to $20 million for its American Depositary Shares to run through December 2014. There’s no doubt that there’s risk in LITB, but the potential is also huge. And at current levels, it’s a reasonable buy; just keep your stops handy.”
Since Paul wrote that, the stock has climbed to nearly 11, and it’s consolidating that gain now. Clearly, all the sellers are out, and now the buyers are slowly coming back to the stock, and new buyers (like yourself) are discovering it. There’s support at 9 from lows hit in January, and the 50-day moving average is at 8.60.
But the big event coming is the fourth-quarter earnings release, which is expected around February 18. If you’ve an appetite for high risk, you could just buy the stock here. You might get lucky. But the more prudent course would be to become a subscriber of Paul’s Cabot China & Emerging Markets Report, so you get his regular updates on all his recommendations.
FYI, in 2013, Paul’s Portfolio was up 50.1%. Click here for more information.
From Cabot Wealth Advisory 7/25/13 Sign up for free Cabot Wealth Advisory
Chinese stocks have been on a tear recently, rebounding from a short, sharp correction in late June and running to new multi-year highs. This has left some stocks stretched pretty far above their 25- and 50-day moving averages, which are used in the Cabot growth disciplines as stand-ins for the stock’s short- and intermediate-term trends. When a stock gets too far above its moving averages, a phenomenon called “reversion to the mean” tends to exert some drag. The result is often either a correction or a period of sideways trading while the moving averages catch up.
One way to get around this problem is to look for attractive stocks that have only recently come public and are still largely unknown to a wide audience. And in that category, one recent IPO I like is LightInTheBox Holding (LITB), a Chinese online retailer whose websites are available to 80% of Internet users worldwide.
LightInTheBox specializes in apparel, small accessories, gadgets, and home & garden products. The company has been around since 2007, and has developed ties with a wide variety of Chinese manufacturers, allowing for direct delivery of products at big discounts, and, in the case of wedding dresses and evening dresses, customized to meet customers’ needs.
LightInTheBox recorded its first profitable quarter in Q1 2013, but revenue growth (up 72% in 2012) indicates that its method of expediting factory-direct sales is gaining traction. The company’s website is available in 19 different languages and more than half of 2012 revenue came from sales in Europe and about a quarter from North America.
LITB is now trading just south of 17, and its 25-day moving average (it hasn’t been trading long enough to have a 50-day!) is at 14.84. Considering that the stock came public at 9.5 in early June, it has made excellent progress.
LITB is a stock I would classify as an attractive speculation. It’s probably best to let it settle down a bit from the excitement of its IPO. But it’s a great example of what emerging market stocks can do when investors are feeling adventurous, as they are now.
If you’d like to follow the fortunes of more emerging market stocks, Cabot China & Emerging Markets Report (which I write) is a great source of ideas and guidance. You can take a look here.
|LightInTheBox Holding (LITB)
Building 2, Area D
Floor 1-2, Diantong Times Square
Beijing, 100020 China
86 10 5692 0099
|Index Membership: N/A
Industry: Catalog & Mail Order Houses
Full Time Employees: 1,126
7/25/13 LightInTheBox Holding (LITB): Recently public Chinese online retailer