Shares of Chinese internet stocks have enjoyed quite a run, to say the least, thus far in 2012. After a frenzy of successful IPOs in the first half of 2011, these companies fell as hard as any industry in the market. As the IPO market dried and Chinese stocks in the U.S. faced increased scrutiny, many investors fled these seemingly speculative stocks in the face of uncertain times. Now with January’s early bull run and the upcoming Facebook IPO, investors are regaining their appetite for one of the most alluring sectors of the market in terms of growth potential.
Whether or not this run is here to stay or just a repeat of last year’s up-and-down ride remains to be seen. Perhaps it was investors who were at fault. So quick were they to pair these Chinese upstarts to their supposed U.S. counterparts (ie. the “Chinese Amazon.com” or the “Chinese Facebook”), that they failed to fully understand the businesses and strategies that they were investing into, let alone the impact of the Chinese government restrictions and economic policies.
Whatever the case may be, the recent run up in Chinese internet stocks have shown that the industry definitely still warrants attention from the investment community.
China’s Internet Rebound
Here are five names that have surged higher since the year started.
1. Renren Inc. (RENN)
Renren is a social network that originally catered towards college students. Sound familiar? While billed as the “Facebook of China,” Renren was probably the closest version of a Chinese Facebook in terms of service and offerings, but it had no where near the dominance in terms of number of users that its U.S. counterpart had. While its debut in April 2011 could be considered successful–closing at $18 from its IPO price of $14–shares of the company plummeted to as low as $3.21 per share at one point. But year-to-date, Renren’s share price has soared over 77 percent to around $6 per share, almost doubling from its 52-week low.
2. E-commerce China Dangdang Inc. (DANG)
The e-commerce site debuted on the New York Stock Exchange in November 2010, and its IPO was so successful that its CEO even considered suing the company’s underwriters for underpricing the stock. Dangdang jumped almost 90 percent from its IPO price of $16 per share on its first trading day in the U.S. markets, but spent all of 2011 in a state of decline. Dangdang shares fell from a high of over $33 per share to a low of just over $4 per share. Year-to-date, however, shares of the company have surged over 85 percent and are currently trading around $8.
3. Youku, Inc. (YOKU)
Like Dangdang, video-hosting site Youku.com debuted on the NYSE late in 2010. Shares spiked to as high as just-under $70 per share in April of last year, but was followed by a precipitous fall during the remainder of 2011 to about $13 per share. The company has been actively adding content partnerships to boost its premium service offerings. It already has deals with Warner Brothers, DreamWorks and Twentieth Century Fox to fills its content library. Thus far in 2012, Youku shares are up 50 percent, trading around $23.55 per.
4. Tudou Holdings Limited (TUDO)
Unlike the other names mentioned above, Tudou’s market debut in the U.S. was not well received. The online-video site company’s IPO in August 2011 couldn’t come at a worst time during, arguably, the height of bearish investor sentiment regarding Chinese stocks trading in the U.S. market. Shares closed at $25.56 on its first trading day, well below the IPO price of $29 per share. It didn’t help that the broader market was going through its own correction at the time either. In addition, Tudou faced stiff competition from more dominant players like Sohu.com (SOHU) and Youku as well. Nevertheless, shares of Tudou are up over 24 percent on the year and are trading around mid-$13 per share.
5. Baidu, Inc. (BIDU)
Discussed widely as the “Google of China,” Baidu is not a new Chinese company in the U.S.–it debuted on the Nasdaq in 2005 and has been considered the best of breed name among all U.S.-listed Chinese companies, not just in the social media/online realm. During the tough summer months, CNBC and Mad Money host Jim Cramer repeatedly said it was the only Chinese company he’d recommend. Baidu’s ADR shares have a market cap of about $45 billion, easily dwarfing the other names on this list. Year-to-date, Baidu’s shares are up a modest 12 percent and trading just south of $130 per.
