Mecox Lane Is A Bargain Here

My investment thesis for why I like Mecox Lane at these current prices before next Tuesday's earnings.

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Dangdang's Problems

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China Embraces Its Inner Tech Bubble

There will be a time when the China tech bubble pops - and it will be a severe reckoning - but that day is still likely at least two years away.

Read the full post here at Forbes.

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Why Would Any Investor Avoid China?

By Eric Jackson04/04/11 - 06:30 AM EDT

NEW YORK (TheStreet) -- The China bears, who include Jim Chanos and Hugh Hendry, have been wrong for two and a half years. Which is puzzling because if you are looking for a part of the world to invest in during the next five to 10 years, how could one ignore China?

If you want exposure to growth, you are going to be hard-pressed to find another place that offers as attractive a risk-reward scenario. Sure, there are other emerging markets to consider, like Brazil and India, but they aren't any more attractive than China, and they're certainly not as big a market.

Would you rather invest only in the U.S. or Europe? Sure, they are less volatile but they have also had a huge run in retracing their financial-crisis losses. I would argue that neither of those mature markets is going to be a more compelling buy than China when looking at potential risk and potential return.

The China bears' arguments have fallen flat so far. Remember when it was conventional wisdom that the Chinese property market was a bubble along the lines of "Dubai times 1,000"? Well, put a few policies into place to reduce speculation by boosting down payments and loan availability and -- guess what? -- the high-end market in coastal cities has appreciably cooled for the past six months.

Remember, more recently, when we heard China was going to have runaway inflation because the government was appreciating the yuan fast enough to the U.S. dollar? Well, the Chinese government has been hiking reserve requirements and interest rates feverishly for the past few months now. On Friday, George Chan of CLSA speculated that the next move from the Chinese government might be the last for a while. PMI numbers have shown that inflation is slowing.

I often hear American investors say: "I don't trust Chinese companies and their numbers (or their government's numbers)." The recent rash of Chinese reverse-merger frauds has demonstrated that there is a pervasive problem in that class of companies. There are major problems that persist to this day, and I have called on the Securities and Exchange Commission and the U.S. listing exchanges to clean up this mess. But for any investor who says he won't invest in China because of high-profile problems such as RINO(RINO_), China MediaExpress(CCME_), Fuqi(FUQI_) and China Agritech(CAGC_), I have a simple recommendation: avoid Chinese reverse-merger companies.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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A First Quarter Report Card

By Eric Jackson
RealMoney Contributor
3/31/2011 9:00 AM EDT
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On Dec. 24, I gave my top four picks for the Chinese Internet sector for 2011. The video, with my picks and rationale, can be accessed here.

It's time for my report card.

In the video, I offered the following picks for the quarter:

• Sina (SINA - commentary - Trade Now)
• Baidu (BIDU - commentary - Trade Now)
• Youku.com (YOKU - commentary -Trade Now)
• Dangdang (DANG - commentary -Trade Now)

Of these, Sina has been a monster. It's risen 56% this quarter, having touched new highs this week above $100. The stock has come a long way since I said it was deeply undervalued, given the performance of its Weibo microblogging platform, as compared with Twitter. I still love everything the company's management is doing and will continue to hold it likely for the balance of the year.

Baidu has also had a stellar quarter. It's up 39% so far. Early in January, the stock was below $100. It's going out above $130. There's a bit of a tempest in a teapot going on over there at the moment, with some fellow RealMoney contributors accusing Baidu of illegally posting their content online. There are copyright negotiations ongoing, but it's a sideshow. Baidu remains the top dog in search in China, and it's poised for more gains for the balance of the year.

Youku has also been a winner. It's up 45% for the quarter so far. However, you'll notice in my video that I suggested waiting until the company's first quarterly numbers in March before buying -- because I expected the stock to stay lower. It didn't. If you had taken my advice, though, you would still have had a 14% gain for the quarter. Still, as I noted in a RealMoney piece Monday, I'm now bearish on these shares. I believe it has run way ahead of itself, and that its competitive environment has changed even since December. I'm now short the stock

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Chinese IPOs Are Coming (Back)

By Eric Jackson
RealMoney Contributor
3/17/2011 12:15 PM EDT
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After the successful U.S. market debuts of E-Commerce China Dangdang (DANG -commentary - Trade Now) and Youku.com(YOKU - commentary - Trade Now) in December, I expected to see many more Chinese companies file for initial public offerings in early 2011. Until a few days ago, though, there were none.

There are signs, however, that several new Chinese companies plan to come to market soon in the U.S. On Monday, Qihoo 360 Technologyfiled a prospectus with the Securities and Exchange Commission to hold an IPO. Qihoo says it is China's third-largest Internet company by user numbers (339 million). It makes antivirus computer security software and is the second-most-popular Internet browser in China after Microsoft's (MSFT - commentary - Trade Now) Internet Explorer. UBS and Citi are co-managing the offering.

Qihoo's revenue has exploded over the past two years, going from $17 million in 2008 to $58 million last year. Over this time, the business has completely remade itself. Previously, two-thirds of its revenue came from selling third-party security software, but now more than 93% of its revenue comes from selling its own software and Internet services, including online advertising.

Unlike Dangdang and Youku, Qihoo is solidly profitable. Its net margins were 15% last year. The company already has $61 million in cash on its balance sheet as of the end of December. In its filing, the company said it seeks to raise up to $200 million from this offering.

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Dangdang Must Step Up

By Eric Jackson
RealMoney Contributor
3/10/2011 1:45 PM EST
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What happened to E-Commerce China Dangdang (DANG - commentary - Trade Now)?

It debuted with great fanfare in an initial public offering last December. The stock priced at $16 a share, which was considered high, opened at $24 and quickly went to the $30 range, closing at a high above $34 in mid-January. Since then, the stock has steadily been returning to its initial trading levels.

Yesterday, it released its first earnings report since going public. As usual with these Chinese stocks, it takes time for the market to digest the news contained in the results. The initial reaction was positive. The stock traded up in the premarket to almost $27 after closing the prior day under $26. But it immediately started selling off yesterday and hasn't stopped yet. Today, the stock is currently trading under $23, down nearly 7%. So what happened in the earnings report?

The e-commerce site, which still makes the majority of its money selling books, revealed that its net revenue for the fourth quarter was up 58% year-over-year to $108 million and its full-year revenue also grew 57% to $346 million.

They also boasted in their earnings call that non-book revenue grew 150%. They aim to reposition themselves -- much like Amazon (AMZN - commentary - Trade Now) did 10 years ago -- by selling a variety of goods via e-commerce rather than just books, which tend to be lower-margin sales. General merchandise revenues in 2010 were up 156% to $59.4 million from the previous year.

Yet, the scale of those general merchandise sales -- only 17% of overall sales -- shows that Dangdang still has a way to go to credibly saying it's no longer just a bookseller.

Its first-quarter guidance indicated that net revenue would be between $102.4 million and $103.6 million, representing a 50% increase year over year. That was in line with estimates.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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The Second-Order Effects of Goldman's Investment in Facebook

Eric Jackson says that you should look for other companies who will be valued from a 10-year potential revenue and profit stream projection, as Facebook was by Goldman Sachs. Eric owns YOKU and SINA.

Fri 01/07/11 11:00 AM EST -- Eric Jackson

Stocks in this video: SINA | GS | DANG | YOKU

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Video: Get Ready for the Next Big Chinese IPO

Eric Jackson says watch for a Renren IPO in early 2011: The Facebook/Groupon of China. Eric owns YOKU.

Tue 12/21/10 07:00 AM EST -- Eric Jackson

Stocks in this video: BIDU | DANG | YOKU

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Dangdang Gets Double-Teamed in Price War

By Eric Jackson
RealMoney Contributor
12/20/2010 5:00 PM EST
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China-based bookseller Dangdang (DANG - commentary - Trade Now) will go down in history as having one of the most successful IPOs of 2010. The company raised just under $300 million, was priced at $16 per share, opened at $24 per share and hasn't looked back. The stock topped out as high as $34 per share a couple of days after the Dec. 7 IPO, but it has since fallen significantly from that level. Still, shares of Dangdang are trading above their initial post-IPO level, giving investors who partook in the IPO a nice return.

Although TD Ameritrade recently said that Dangdang is one of the three most traded stocks at the moment (the others are Youku (YOKY - commentary - Trade Now) and Baidu (BIDU - commentary - Trade Now)), it's amazing to me that there is not more information about the company readily available in the U.S.

For example, over the last week, Dangdang has been attacked by two companies that want to enter into a price war with it. It's not surprising. After all, Dangdang is in the middle of its first quarter as a public company. All newly public companies like to come out of the gate strong during their first earnings call. Their competitors know that this success can start to feed on itself with investors and consumers alike. Therefore, why not try to short-circuit that positive feedback loop with a negative one?

In other words, by entering in to a price war, competitors can make it appear that the new IPO is stumbling in its first earnings call, which can seed fear and doubt among investors and consumers. This, in turn, might position the competitors as "more successful."

At the moment, Dangdang is being attacked by private Chinese company 360buy and American juggernaut Amazon (AMZN - commentary - Trade Now). 360buy (also known as Jingdong Mall) recently announced that it would spend RMB 80 million (approximately $12 million) on discounting prices prior to the peak holiday shopping season. This came after 360buy said a week ago that it would drop prices on its books by 20% in order to win business.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Dangdang Price War

Mon, 20 Dec 2010 - Eric Jackson

Contributor Eric Jackson says recent Chinese IPO Dangdang has been attacked by 2 competitors within the last week on pricing into the holiday season. But why hasn't any of the American business media covered it?

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Get Ready for China's Next Blockbuster IPO

By Eric Jackson
RealMoney Contributor
12/16/2010 5:30 PM EST
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If we've learned anything from the successful IPOs of Youku (YOKU - commentary - Trade Now) andDangdang (DANG - commentary - Trade Now) this month, it's that U.S. investors and media love referring to these Chinese companies in relation to their closest domestic equivalents.

Youku was constantly referred to as the "YouTube of China," though some smarter analysts said that it was closer to the "Hulu of China" because of its more professional, rather than user-generated, content. Even more astute analysts made said Youku could possibly become the "Netflix (NFLX - commentary - Trade Now) of China," based on Netflix's new streaming capabilities, which Youku might emulate.

With Dangdang (pronounced "Dong Dong"), the obvious comparison was Amazon (AMZN -commentary - Trade Now), hence it became the "Amazon of China."

Of course, none of these comparisons are completely accurate. One difference is that the newly public Chinese companies face different competitive dynamics in China than their counterparts faced in the U.S. when they were at similar stages of development. There are also differences in the growth rates and potential market sizes. Regardless, investors clearly wanted in on the action.

Other Chinese IPOs last week that weren't instantly compared to U.S. firms, including Bona Film Group(BONA - commentary - Trade Now) (BONA) and Ski-Mobi (MOBI - commentary - Trade Now) quickly saw their stocks fall (though I believe Bona has a great business).

So what's the next big IPO we'll see out of China? Get ready for Renren, the new "Facebook/Groupon of China." Renren, a subsidiary of Beijing-based Oak Pacific Interactive, is China's leading social-networking services (SNS) provider. The company currently has 150 million registered users, 480 million page views a day and 4.1 billion user interactions per day.

To put that into context, Facebook has 500 million active registered users, and its valuation as a private company has recently been estimated to be between $30 billion and $50 billion. Tencent has over 650 million users of its QQ instant messaging service (which is obviously a different type of social service than Facebook), and its market capitalization in Hong Kong is $41 billion (14% bigger than Baidu (BIDU -commentary - Trade Now).)

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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More IPOs Are Needed

By Eric Jackson, Senior Contributor12/15/10 - 06:00 AM EST

NEW YORK (TheStreet) -- Last night, I watched the Charlie Rose interview with Groupon Founder and CEO Andrew Mason. It was the first time I've seen him speak and, aside from a bad sense of humor, I was impressed.

What grabs your attention is that these guys started a company and reportedly got a $6 billion buyout offer within two years -- in the wake of the deepest recession since the Great Depression. Tony Robbins should make them a case study to pump up his audience at future motivational seminars.

Different reports circulated this past week that Groupon does annualized gross revenues of $2 billion before splitting profits with the merchants they refer business to. That kind of growth demonstrates how -- in an era of Facebook and Twitter -- good ideas and businesses can propagate like crazy.

What's more impressive about Groupon though is it's turning down Google's(GOOG_) generous buyout offer. Instead, it opted to go it alone and grow its business. Here's what Mason said about why it did that: "Here is what I can say. I think every choice we make in the company comes down to a core of this idea we have of what Groupon could be and the place it could play in the world and in the rest of the 21st century. And every choice we make is which option will it make it more possible for us to get there? " So I think whatever we decide to do with the company, the people that we hire, the deals we run, every itty-bitty choices, how do we build this company into something that transforms the way people buy from local businesses."

If the offer on the table for Groupon was $6 billion, Google was offering to pay four times what it paid for YouTube four years ago and double what it paid for DoubleClick three years ago.

We're just not used to people saying no to that kind of money.

Four years ago, Facebook turned down a reported $1 billion offer from Yahoo!(YHOO_)(YHOO). Eighteen months later, Microsoft(MSFT_) invested $240 million in the company at a $15 billion post-money valuation. There were calls at the time that the price was completely unrealistic and showed how desperate Microsoft was to stay relevant. Yet, today, most analysts say the company would be worth $30 billion to $50 billion if it went public.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Chinese IPOs and the Value Investor

By Eric Jackson
RealMoney Contributor
12/13/2010 5:01 PM EST
Click here for more stories by Eric Jackson

A week ago, I think it's fair to say that 99% of investors and probably 99.5% of the media weren't paying attention to the fact that Youku (YOKU - commentary - Trade Now) or Dangdang (DANG - commentary -Trade Now) were going public.

However, after these stocks immediately jumped over 160% and 80% in value on their first day of trading on Wednesday, people sat up and took notice. Then, as their prices kept going up on Thursday and Friday morning, people's jaws started to really drop.

However, the inevitable backlash started to come against both companies. Most of the critics of both companies are Bill Miller-esque raging value fundamentalists.

Speaking about Youku, you often hear the complaint, "How can a company that had $35 million in revenue in the first nine months of the year and lost money be worth $5 billion?" (That was Friday. It's worth less today, but you get the point.)

I consider myself a value investor at heart. How can you not like the idea of picking up something for 50 cents when all indications are that it's worth a buck? And I certainly believe that the market is not always efficient or rational, thereby giving investors many opportunities to pick up something that has been temporarily thrown into the discount bin.

At the same time, I've never been good at investing on the basis of momentum or trading the technicals of a chart. Many people do it every day and swear by it. But that's just not me.

However, speaking as a "value guy," I get a little sick at the self-righteousness of some value investors and their criticisms of these Chinese IPOs. The simple truth is that any pure value investor missed Amazon.com(AMZN - commentary - Trade Now) after its IPO and for the last 13 years since.

I don't think there's ever been a time during that stretch -- even post-Lehman -- when a value investor would have been said to get into Amazon. Yet it's been a great investment over that period.

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Rip-Roaring China IPOs

By Eric Jackson
RealMoney Contributor
12/9/2010 11:30 AM EST
Click here for more stories by Eric Jackson

Wednesday's price action in the new Chinese initial public offerings in Youku (YOKU -commentary - Trade Now) and Dangdang (DANG- commentary - Trade Now) was eye-popping. Americans love easy comparisons to for understanding foreign businesses, so we've heard endlessly heard that Youku and Dangdang are China's YouTube and Amazon (AMZN -commentary - Trade Now), respectively.

Dangdang ended its first day of trading up 87%. Youku ended up 161% for the day. It feels like 1999 all over again.

However, any time you see moves like that, you will get the chorus of worriers. "These price-to-sales ratios are crazy!" is one comment I heard during yesterday's market action. "This is going to end in tears!" One more: "I'm going to short the hell out of these two stocks."

I wrote about Youku being the monster China IPO two weeks ago, though I'm not some Pollyanna cheerleader. Still, even I was surprised by the giant move the stock made yesterday.

The critics of Youku point out that the company has raised more than $100 million from venture capitalists to date, and that it has yet to turn a profit. In fact, Youku's losses have only grown along with the company itself. It has faced increasing costs of acquiring proprietary content (think Hulu), keeping up with intense competition, paying for more servers to stream video and large pirating risks. Even if the company can supplement its advertising-based revenue with subscription revenue, critics wonder how will it will convince the Chinese to pay for content when bootleg DVDs can be bought for pennies on the street.

Yet, what Youku has going for it -- as I've said before -- is that it's the leader in the online video space at the moment. China's No. 2 online-video company, Tudou, filed to go public first, but Youku is actually the first one out. If it didn't have name recognition in the U.S. before yesterday, it does now. That will be important for Youku's continued access to the capital markets in order to fund its growth -- assuming its price holds up.

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