Archives for January 2007

I should have skipped the cup with handle with CTRP in 2005 and bought the 200-day moving average trend buy.

Back on August 23, 2005, I wrote a case study on Ctrip.com Intl. (CTRP) while the stock was trading at a pre-split adjusted $53.57. I knew Chinese stocks were something to watch in the future, especially after the huge speculation runs of SINA and SOHU; so I took a position. Problem is, I took the position on the cup with handle breakout but was later forced to sell based on a sell stop and never caught the entire run (the market was shaky at the time).

CTRP is one of the reasons over the past couple of years why I have minimized buying cup with handle breakouts and search dearly from 200-day moving average trend buys. Later in 2005, when I was forced to sell, the stock held support at the 200-d m.a. and never violated the long term average. This was the ideal trend buy for the young growth type stock. Instead of buying in 2005, I was selling. Now in 2006 and 2007, I do the opposite. I watch others buy the breakout and I enter my positions closer to major support areas such as the 200-d m.a. CTRP was one of the original high fliers from the Chinese market but several new faces are looking to take off, including MR which I highlighted yesterday.

I am reading a pamphlet from Investment U, titled Profit from China by John Wiley & Sons and it’s not bad. I found the quote by Jim Rogers (co-founder of the Quantum Fund) to probably be accurate:

“The nineteenth century belonged to Britain. The twentieth century belonged to the United States. And the twenty-first century will belong to China”

Past Blog Appearances by CTRP:
Ctrip.com (CTRP) Updated – 3/15/06

Tuesday’s MSW Daily Screen – 11/15/06

Here is some of the research from the case study I performed back in August 2005:
8/23/05
CASE STUDY – Cup with Handle Setup
CTRP – Ctrip.com Intl ADS

Leisure Services – Transportation

3-Year EPS Rate: 113%
3-Year Sales Rate: 83%
ROE: 28%
PEG: 1.13

EPS Analysis:
2003: 0.06
2004: 1.02
2005: 1.48 (E) High estimate: 1.62
2006: 1.98 (E) High estimate: 2.39

Revenue: (in millions)
2003: 173.00
2004: 334.00

Net Income: (in millions)
2003: 53.8
2004: 133.00

Number of Institutions (last reporting period):
Total: 38
Money Mangers: 21
Mutual Funds: 16
Banks: 1
Insurance Co.: 0

New Positions: 16
Positions Sold Out: 9

Here are some Updated Numbers from 2007:

3-Year Net Income: 150%
3-Year Sales Rate: 75%
ROE: 32%

EPS Analysis:
2005: 0.86
2004: 0.51
2003: 0.03

Revenue: (in millions)
2005: 67.18
2004: 40.32
2003: 20.91

Net Income: (in millions)
2005: 224.0
2004: 133.0
2003: 53.8

Number of Institutions (last reporting period):
Total: 60% Holdings
Money Market: 88
Mutual Funds: 158
Other: 11

As we can see, 67 new money mangers own the stock, 142 new mutual funds own shares and 10 other institutional holders have grabbed shares since my case study in 2005. This explains exactly why the 200-d m.a. held support at each challenge over the past two years.

This is basic common sense!

Stock of the Day
Mindray Medical International Ltd.
Monday’s Closing Price: MR – $24.95

Mindray Medical International Limited engages in the development, manufacture, and marketing of medical devices in China. It offers approximately 40 products through its three segments: Patient Monitoring Devices, Diagnostic Laboratory Instruments, and Ultrasound Imaging Systems. The company’s Patient Monitoring Devices segment primarily offers portable PM-9000 multi-parameter patient monitoring device and approximately 15 patient monitoring devices. The Diagnostic Laboratory Instruments segment offers a range of approximately 10 hematology and biochemistry analyzers that perform analysis on blood, urine, and other bodily fluid samples for clinical diagnosis and treatment. The Ultrasound Imaging Systems segment offers approximately 10 ultrasound imaging systems and it would introduce the color Doppler ultrasound imaging system for use in several clinical areas, such as urology, gynecology, obstetrics, and cardiology. The company sells its products primarily to distributors and directly to hospitals, clinics, government agencies, original design manufacturers, and original equipment manufacturers. It also offers its products in Asia and Europe. Mindray Medical International was incorporated in 2005 and is headquartered in Shenzhen, the People’s Republic of China – Provided by Yahoo Finance

What catches my eye the most about this stock is the number of shares bought and sold during the most recent reporting period! The buy to sell ratio is 39-to-1 which represents institutional accumulation in my opinion and I get warm and fuzzy when these professional buyers support a stock I own (disclosure: I do own shares prior to writing this post). The amount of fundamental data is limited on the young Chinese company but I have listed what I can find using a variety of sources (Yahoo giving me the most data).

Looking at the chart, we can see that the stock is gaining support along the 50-day moving average and is within 15% of a new all-time high (set back in December 2006 at $27.20). The weekly chart shows a flat base that has been forming over the past seven weeks with potential for an up-side breakout. A 200-d m.a. has not formed at this point in time but will be valuable in the future. Overall, I like this young stock and I like the market it comes from.

Here is an insert from a recent SFO magazine article:
Are Communists The World’s Best Capitalists?
by: Jim Trippon

How China has become a driving force in today’s marketplace.

“Find the Stars
I feel the key to success is to buy good companies. I recommend companies that will participate in the best of the Chinese growth story without exposing investors to undue risk. In the long run, I believe the Chinese big cap/value market will bounce above worldwide indices because of the continued growth of both internal and external consumer markets. Many blue-chip Chinese companies pay regular and reliable dividends. Substantial and dependable dividend payments have a soothing way of leveling out the bumps in a volatile market. A solid dividend, sometimes as high as seven percent, helps take the sting out of market volatility.”

Sector: Health Care
Industry: Health Care Equipment
52wk Range: 15.20 – 27.20

Institutional Numbers:
Money Market: 21
Mutual Fund: 75
Other: 4

Shares Bought Last Period: 6.4 million
Shares Sold Last Period: 0.2 million

Value of Shares Bought: $156.4 million
Value of Shares Sold: $4.9 million

Top Holder: Emerging Markets Management LLC
2.1 mil Shares for 0.20% of Portfolio
Total Equity Value of Portfolio: $3.2 billion

Available Fundamental Numbers:
Market Cap.: $1.33bb
P/E (ttm): 59.1
PEG Ratio: 1.42
Profit Margin (ttm): 24.68%
Operating Margin (ttm): 26.31%
Qtrly Revenue Growth (yoy): 21.60%
Qtrly Earnings Growth (yoy): 131.00%
Total Cash: 37.45M
Total Cash Per Share: 0.354
Total Debt: 5.55M
Total Debt/Equity: 0.021
Current Ratio: 6.712
Book Value Per Share: 2.539
Operating Cash Flow : 60.14M

Earnings:
Yearly (2007): 0.59E
Yearly (2006): 0.47E
Yearly (2005): 0.29

Revenue (millions):
Yearly (2007): 269.15E
Yearly (2006): 190.03E
Yearly (2005): 134.9

Growth Estimate (Next 5 years):
35.1%