Fund Manager Discusses China Stock Picks (CTRP, TOMO, LTON)

In this week's edition, Barron's interviewed Allison Thacker, Internet analyst and portfolio manager for RS Investments. Thacker's $85 million Internet Age fund has posted an average annual return of 32.5% over the past three years, while her $90 million Information Age fund was up an average of 29.7% for the period. An extract from Barron's (sub req):

One of her favorite areas right now is online travel, which of course has already been proven to be a very successful Internet segment in other geographic markets. Thacker holds a stake in Ctrip.com International (CTRP), which is the number one online travel site in China.

Less-restricted leisure travel is still a relatively new industry in China, where most arrangements still need to be brokered by travel agents, who sometimes capture as much as 25% of a hotel room rate in fees, Thacker says.

Ctrip takes about 14% of the hotel fee off of the top, which is still healthy revenue but certainly more competitive than the brick-and-mortar travel agents, Thacker notes. Only 17% of China's travelers books online, giving CTrip plenty of upside, she argues. CTrip ADRs hit a 52-week high of 44 on April 10, adjusting for a recent 2-1 split.

"The great thing about it is that hotels are even more fragmented in China than in the United States," which has consolidated through large chains, Thacker says.

Another area that has caught Thacker's eye is wireless services. Although she has yet to take the plunge, the stockpicker is studying "wireless portals" like Tom Online (TOMO) and Linktone (LTON) that sell ring tones and other entertainment services.

The Internet expert says she didn't dive into high-profile Internet portal stocks, such as SINA (SINA), because of high valuations. Plus, she generally keeps the number of Internet-related Chinese holdings to between two and five out of a possible 70 or so in her two portfolios. That limits her risk exposure.

See also our one-page summary of the entire Barron's edition.