Sohu.com: 220M Chinese Internet Users and Growing

After scanning the stock charts this early Monday morning, I’ve come up with two stock picks. One is a short-sell and the other is a buy candidate. The short-sell I won’t write about this week, because the long candidate is much more exciting and a longer term position than short-selling. I’ll just say the short-sell is Abbott Labs (ABT).

The buy candidate is a Chinese internet company. With over 1 billion people in China, investing in companies in any country with this population size is a simple no-brainer of supply and demand, and especially when it comes to new age, new school, new economy business of the internet. Remember when World War II ended? How many people were in the US? About 200 million? With China sitting at 1.2 billion people currently, this is a 6 times increase of that - quantum and exponential all the way, the likes of which the western world has never seen in the past, and may never want to see or imagine in the future. About a year ago, I was listening to Lou Dobbs on Bloomberg talk about how the rest of the world would be nothing without the US consumer, while I simultaneously read a report from the CEO of the Bank of China saying that domestic consumer demand there is growing at double digit rates. Who to believe? I’ll leave that up to you. My first question for Dobbs, however, would be, when was the last time he was in China?

Sohu.com (SOHU)

Sohu Company Profile

Sohu.com Inc. (Sohu) is an Internet media company providing Chinese consumers with their daily source of information, entertainment and communication. It has built matrices of Chinese languages Web properties and search engines, consisting of www.sohu.com, a mass portal and online media destination; www.sogou.com, an interactive search engine with a database capacity of more than 10 billion retrieved Web pages; www.chinaren.com, an online alumni club; www.17173.com, a games information portal; www.focus.cn, a real estate Website; www.goodfeel.com.cn, a wireless service provider, and www.go2map.com, an online mapping service provider.

The company operates two massively multi-player online role-playing games (MMORPG games), namely Tian Long Ba Bu [TLBB] and Blade Online [BO], and a casual game platform. Sohu also offers wireless value-added services, such as news, information, music, ringtone and picture content sent over mobile phones.

Buy Long:

• Buy Entry: 55.13 to 62.73
• Stop Loss: 2% to 8% or more depending upon how much you can handle losing.

Take Profit Areas:

• 74.05 to 79.71
• 88.69 to 103.69
• 104.00 to 121.59
• 135.76 to 158.72
• 177.33 to 207.33

China Internet Usage

China currently has the biggest number of internet users in the world, with the US at a close second. China has now recorded about 220 million internet users. Watch China and US internet users and usage going forward - I expect China will leave the rest of the world in its dust, in time. As India continues to develop, they should take the second place someday soon, with their 800 million or so population.

Now, I’m already thinking that I’m going to see comments on my post here saying something to the effect of how I’m crazy to buy into a China stock right now because the Beijing Olympics have ended, and everyone outside of China is expecting a slow-down there for a variety of reasons right or wrong, good or bad. If you call a slow-down from 12% to 8% growth a slow down, that’s your choice. I call it growth, and big to say the least. Or any other number of comments that don’t agree with me. No problem, I’ll just wish you a Kung Hei Fat Choi right now.

I’ll put it to you this way. I don’t listen much to analysts, or anyone else for that matter, when they talk about another country's future prospects, and they don’t have many - or any - visas stamped into their passports. Speculate all you want from your armchair, but not with my money. For those of us who visit China frequently, we know all too well what’s going on there with their own domestic driven consumer demand (and high quality demand, I should also add).

Disclosure: Author holds a long position in SOHU

Comments

[Urbane Gori...:]

Last time I looked, SOHU has better numbers than BIDU or SINA as well, and it would appear to be close to a buy point... However, it would seem that BIDU moves better overall. jegan

2008 Sep 15 12:40 PM

[nelineu:]

Thanks for a refresh of the internal breakdown of the various WebSites of the Parent Company, Sohu.com Inc. I should advise anyone interested in this dynamic Chinese Company - investmentwise or otherwise - to visit each of their listed media WebSites and ponder the graphics, dynamic and structure. Even if you don't understand the maze of the Chinese language found in these sites, there are plenty of Links that will take you on a Discovery Tour you won't regret!. Certainly, it will leave with you an inclination of the magnatude and downline potential of this company that is on a robust growth path and continued expansion - that is going to project it and its Online Products into all areas of this vastly populated country - and, by the way, elsewhere too! Should it wonder anyone out there why Warren Buffett has got his 'Radar Screen' firmly fixed on this company for a possible investment entry point ... I would say no!

2008 Sep 16 06:12 AM

[Michael Mic...:]

Needless to say, we were stopped out on SOHU, and all our long positions last three weeks. Is this a bottom yet or at least oversold? We are looking for a rebound to the upside, just not sure when? www.invest2success.com

2008 Oct 11 07:37 PM