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Universal Travel Group: A Not-So Undiscovered China Small Cap Gem

Jan. 24, 2011 3:46 PM ETUTA, TCOM8 Comments
Natty Greene profile picture
Natty Greene

Before investing in any stock, I have a routine of due diligence that looks at a company’s fundamentals, technicals and common equity ownership. Based on the level of strength in all three areas determines how much I will invest in any given stock.

I have shared some of the fundamental reasons to support an investment in Universal Travel Group (UTA) in a recent article comparing China travel sector peers Ctrip.com (CTRP) and UTA. This follow-up piece will focus on the equity ownership strength of UTA.

When looking at a company’s ownership makeup, I always investigate the level and quality of equity shareholders (management, board members, institutions, individuals). Some of the questions I look to answer are as follows:
1. Is there institutional support?
2. Is there high insider ownership of shares?
3. Are insiders buying the stock?
4. Who are the largest individual shareholders and why?

This strength of equity ownership is important because as an individual investor I do not have the insider knowledge of management or the rigorous level of due diligence that is undertaken by individuals and institutions who have invested multi-millions of dollars in a given company.

With Universal Travel Group, my equity ownership research has resulted in a high rating in this department for the following reasons:

1. Level of institutional support (26.2%, including the top travel sector institutional investor, PAR Capital, covered in a previous Seeking Alpha article, and a newly reported position by Rochdale Investment Management of 799,270 shares worth $5.4 million. This high level of institutional support makes UTA the second highest institutionally owned stock on the Emerging China Small Cap (ECSC) Index Top 10 List.

2. CEO Jiang’s significant share ownership (4,498,246 shares, or 22% of outstanding shares) aligns her with shareholder value interests.

3. Recent insider buying by the

This article was written by

Natty Greene profile picture
Nate Greene is an avid investor who focuses on small cap, high-growth companies that are undiscovered. His particular interest is China and the Chinese consumer. He looks for undervalued companies that will grow quickly due to the consumption trends of the rising Chinese middle class.

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Comments (8)

Insiders have historically been avid sellers of this stock.
High inside ownership is not due to significant purchases of shares.
Natty Greene profile picture

You are completely incorrect, as CEO Jiang has never sold a single share. She has only acquired shares via stock based compensation and via open market buys, like her 200,000 share "buy" purchase (pre-split) on 2/13/09. And the CFO, Xie, has never sold a single share. Yet, he just bought nearly 39,850 shares for $6.20 referenced and cited in my article. Please stick with the facts.
That is becoming quite obvious watching it. As soon as it starts to rise it seems to get knocked down.
MagicDiligence profile picture
Be careful. UTA is a short-seller playground.
egarl profile picture
24 Jan. 2011
I owned UTA over two years ago when it really looked to be a rapid riser. But like some other small cap China stocks it has just not lived up to expectations.
No matter how hard they are pushed, performance is the true test. UTA has not performed and though this time may be different, I would rather wait and see.
I am long also but the stock is really struggling. Been rethinking my position so this article is very helpful. Thanks.
Natty Greene profile picture
I would not call "struggling" the fact that institutions are adding, insiders are buying, and the largest non-insider investor is adding to his position in the $6.50 range. I would call that accumulation by smart folks who have done tons of DD. Patience is in order.
The Balanced Bull profile picture
Also long UTA. Thanks for the research. Good stuff.
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Universal Travel Group
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