2010 Outlook: One Quarter in the Books

By Eric Jackson
RealMoney Contributor
4/12/2010 12:01 PM EDT
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With the first quarter in the books, it's always illuminating -- and sometimes a little humbling -- to review prior predictions. At the end of last year, I made some stock picks and macro predictions. Here's how they've panned out so far.

Universal Travel Group (UTA - commentary -Trade Now)

I just met with this company on my recent trip to China and wrote about it last week. I still like it moving forward, as it is going after the packaged-tour market in China, and the country's domestic tourism business -- let alone the international one -- is set to boom over the next decade. Since I wrote about the stock in late December, it is down 4.7% vs. the S&P's 6.8% gain.

China Sky One Medical (CSKI - commentary- Trade Now)

A provider of nutritional supplements, including ones for traditional Chinese medicine, CSKI has dropped 27% since my pick. I've learned that the company doesn't have any Chinese-language version of its website. To a large extent, it exists only for the US investor market. I would avoid it moving forward.

China Agritech (CAGC - commentary - Trade Now)

The stock has been on a tear since I picked it -- up 94% this quarter. I like the company and its Chinese organic fertilizer business. I recently met with the company's COO. The problem is valuation -- it's a bit frothy right now. I would wait before getting in.

Puda Coal (PUDA - commentary - Trade Now)

I'm still a big believer in this coking-coal company, which is gaining ownership of more and more coal mines in the Shanxi province of China. The stock is up 77% since my suggestion and just got upgraded last week. There are still good times ahead.

Fuqi International (FUQI - commentary -Trade Now) The stock had a high-profile stumble when it delayed filing its 10K. News last week suggested the company would file it soon, which breathed new life into the stock. Still, it's down 29% since my recommendation. Assuming it cleans up its books, the stock is in a great space as a middle-market Chinese jeweler.

So, some hits and misses in this group. However, if you had taken an equally weighted position in all five stocks, the portfolio would have returned 22%, or triple the return of the S&P 500 over that period.

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A China Travel Stock That's Going Places: UTA

By Eric Jackson
RealMoney Contributor
4/5/2010 3:00 PM EDT
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Two weeks ago, I met with Universal Travel Group (UTA - commentary - Trade Now) at its corporate offices in Shenzhen, China. The company is a relatively small player in the fast-growing China travel sector, and it is seemingly undervalued compared with larger rivals such as Ctrip (CTRP - commentary - Trade Now) and eLong (which trades in Hong Kong).

With a price around $9.65, Universal sports a price-to-earnings ratio of 7.9 times and a market capitalization of $140 million. We believe in Universal and believe it will do well in the next couple of years, but investors should be clear on what this company is and what it is not.

When most people think of Chinese-related travel, they think of Ctrip. Ctrip has the look and feel of any large U.S. travel site, like Expedia (EXPD -commentary - Trade Now). It spends an enormous amount on marketing its brand in China. We saw it in virtually every airport we traveled to during a recent two-week trip. Ctrip's market cap is $5 billion, with a lofty P/E ratio of 54. It makes the majority of its revenue from broker fees on hotel reservations (45%) and air-ticketing services (41%).

Many investors look at Universal as a smaller, undervalued version of Ctrip. If Universal had only half the valuation of Ctrip, this type of thinking goes, there would be an immediate tripling in the stock price. However, this is not a proper way to think about Universal's business or its potential as a stock.

When we met with Universal's managers, they didn't deny that they try to piggyback on Ctrip's well-known brand with U.S. investors. Universal points to its Web site as a means to do travel bookings, with additional call-center support. The company points out its valuation relative to Ctrip. Yet what Western investors need to understand is that Universal, at its core, is a packaged-tour company, not a smaller version of Ctrip.

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China Trip: Universal Travel Group

By Eric Jackson
RealMoney Contributor
3/22/2010 12:00 PM EDT
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I just landed in Hong Kong for the start of a two-week tour of China, meeting with management teams of emerging Chinese growth companies. During the trip, I'll be meeting with China Agritech (CAGC -commentary - Trade Now), Origin Agritech (SEED - commentary - Trade Now), China Mass Media (CMM- commentary - Trade Now), Shengkai Innovations (SHE - commentary - Trade Now), Oriental Paper(ONP - commentary - Trade Now), Puda Coal (PUDA - commentary - Trade Now), China Wind Systems(CWS - commentary - Trade Now), China-Biotics (CHBT - commentary - Trade Now) and -- just confirmed --Fuqi International (FUQI - commentary - Trade Now) (see my article from last week). I'll be reporting on my meetings and my impressions of the companies in the coming weeks here on RealMoney. However, my first meeting this week will be with Universal Travel Group (UTA - commentary - Trade Now).

UTA books travel reservations, trips and junkets, and sells online travel tickets to the mainland Chinese. It is aiming to be the leading travel services provider in the country. It was founded as Shenzhen Yu Zhi Aviation Services in 1998 and went public on the OTC market in the US in 2006. Last year, it upgraded its listing in the US to the NYSE.

It has had an assortment of businesses under its roof over the years. It has owned and operated an air-cargo business (which it sold off last year) and has run an online e-commerce website and call center-oriented tour-package reservation service. Even its home base has been a bit split. Its main headquarters since foundation has been in Shenzhen, a short hop to the mainland from Hong Kong. However, last year, the company decided to open a second headquarters inland in the town of Chongqing, where it has also invested in a larger call-center operation.

The main reason for any casual investor to be interested in UTA is that the company is relatively under-valued in the booming Chinese tourism sector. China's tourism industry is one of the fastest-growing industries in the country. Most travel agencies are domestically owned. Only 10-15% of the country's travel agencies are international. The market in China is highly fragmented, with the largest player having only an 8% market share. By 2020, China will become the single largest source of international tourism and will be the largest domestic tourism market in the world.

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Ask Your Questions for Chinese Growth Companies

I am going to be in China for 2 weeks at the end of this month to meet with management of several Chinese companies. I'm now working to confirm the final list of meetings, but it appears likely as though I'll meet with the majority of the following companies:

- Origin Agritech SEED

- China Agritech CAGC

- China Mass Media CMM

- China Wind Systems CWS

- Puda Coal PUDA

- FUQI FUQI

- Universal Travel UTA

- Shengkai Innovations SHE

If you have any specific questions, please send them along. If I ask, and they answer, I will post the responses once I get back.

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