...and China Nets

11/28/2003 12:00 am EST


Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

"The average stock in my Model Portfolios had over 59% sales growth during the past four quarters," says Louis Navellier in his MPT Review. "And thanks to expanding profit margins, the average stock had earnings growth of 175% during the past four quarters." Two of his fastest-growing picks are Chinese Internet plays.

"The stock with the strongest sales growth in my Model Portfolios is SINA Corp. (SINA NASDAQ), which I've added to our Model Portfolios this month. SINA is a leading online media company and information service provider based in Shanghai, China. SINA's sales during the past four quarters have surged over 283%, and the company just made the transition from losing money to posting a sizable profit. Typically, when a money-losing stock starts posting a profit, aggressive institutional investors start adding the stock to their portfolios. I expect that SINA Corporation will benefit from persistent institutional buying pressure. For the third quarter, SINA posted a record profit of 21 cents a share. Sales more than tripled to $31.9 million. I was particularly impressed by the company's margins. SINA's gross margins rose to a record high of 70%.

"Another Chinese Internet service company in my Model Portfolio is NetEase.com (NTES NASDAQ), which has posted similar sales growth to SINA and is now starting to make money. Its latest quarterly results were extremely impressive. Net sales nearly doubled, and its profits jumped to over $10 million, or 30 cents a share. This is compared with a loss of $1.1 million for the same quarter one year ago. China offers incredible growth prospects now that online shopping is becoming increasingly popular. The Chinese Internet market is in its infancy, with only 5% of the population online. In the urban areas, where there are between 200-300 million people, the penetration rate is about 13%. As more Chinese move to urban areas to take advantage of new jobs, Internet usage will soar. In my opinion, NetEase.com and SINA will likely post incredible growth for the foreseeable future."

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