Robert Hsu and the Motley Fool are both saying…

By Travis Johnson, Stock Gumshoe, November 7, 2007

This isn’t a real sleuth job, just a quick note because the email box is heating up with two competing teaser recommendations for the same stock … and the company reports earnings after the close on Wednesday, so now’s a decent time to be paying attention to it.

The first recommender is Robert Hsu, whose China Strategy I know is pretty closely followed by the Gumshoe faithful — certainly, China has been the place to be for the past couple years, and his service has ridden quite a nice wave for investors.

Hsu calls this one of the “most exciting and transformational companies I have ever discovered,” and compares it to China Mobile, Ford, Google, Whirlpool and some others. Kind of odd examples, but we get the point.

And he practically whacks you over the head with the insistence that you need to own shares before they report earnings.

He talks about the fact that Neil Shen founded this travel company in order to help bring easy online travel arrangements to the masses in China, but also let them talk to a travel agent.

So that’s a big clue there, of course. Neil Shen is still a director of the company, though his “real” job now is with Sequoia Capital, so one would imagine that he’s helping to make some other folks rich.

And the other firm touting this firm, though not specifically with a short term call on tomorrow’s earnings, is the Motley Fool — they’re teasing the stock for Tom Gardner’s Hidden Gems service, which has done a nice job of beating the market over the last few years.

The Fool tease, which we’ve also looked at before, is for the “crazy idea that dazzled Bill Gates.” It was actually one of the first ones I wrote up for you, back in March or April when I started sharing the wisdom of the mighty Gumshoe.

So … what are we dealing with? Well, to drag this on a little further, the crazy idea that dazzled Bill Gates was that you could run a travel agency online — and that idea, which Microsoft ended up being very close partners with, turned into Expedia.

The guys who “borrowed” that idea for China, including Neil Shen, founded an online travel agency in China that they called …

Ctrip (CTRP)

So that’s it, really — I do happen to hold some Ctrip options as a bet on the volatility running up to the Olympics, but I’m not all that comfortable with the stock’s valuation (forward PE of 60) and have gotten nervous every time I thought of buying shares. Same thing with the other company that was founded by the same folks, Home Inns — nosebleed PE ratios for fairly pedestrian travel companies … though of course they happen to be in China, land of the nosebleed.

Just thought I’d bring this one to your attention because once again an adviser is urging you to buy before earnings … in the past, this kind of call has been just as likely to backfire as to succeed, so flip your own coin and make your own call. Do note that the analysts have actually been pretty good at calling Ctrip’s numbers in the past, they’ve only surprised once this year on their quarterly numbers. And as a secondary note, the last two times they released earnings they also released guidance that was below the street’s consensus, so though they’re certainly growing there’s no guarantee that they’ll grow a lot between now and Thursday, or that they’re growing fast enough to get the momentum guys aboard.

So … I personally like the company but fear the valuation … for the sake of my small call option position, I hope they do beat estimates and raise guidance for next year’s Olympic season when we hear from them tomorrow, but I’d hesitate to say that this is guaranteed, or even particularly likely. If you care to listen to CTRP’s management explain how things are going, you can listen in on their conference call at 8pm tomorrow.

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5 Comments on "Robert Hsu and the Motley Fool are both saying…"

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November 7, 2007 5:19 pm
hi there.love your research! tell me do you have an idea of what stock could be porter stansbery refering to, with this comment????? “One company stands heads and shoulders above the rest in terms of both financial performance and quality of culture. It’s not only the best company in the homebuilder sector, it is one of the truly exceptional businesses in the world. Right now, you have the opportunity to buy this company at a price that should produce at least 20% annual gains for a decade. It’s the single best homebuilder to buy, and it’s the latest recommendation of… Read more »
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Anonymous
November 7, 2007 7:04 pm

Your Porter Stansberry p.s. comment refers to a teaser already sleuthed: The Pasadena Investment Society

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Anonymous
November 7, 2007 7:21 pm

Stansberry is referring to NVR, Inc (Amex:NVR)in his latest letter. Not a rush to buy. Holds more cash than long term debt, doesn’t own land to develop, it options finished lots, well positioned, fiscally conservative.

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Anonymous
November 8, 2007 1:47 am

Glad to have found you. Thought I’d throw in my 2 cents on a different subject that will likely soon find it’s way here. After some careful Sherlock Holmesing, Jeff Siegels latest teaser on China’s latest afront to Starbucks is a little coffee stock known as CFPC.OB. The first store is slated to open this month with 5 more to follow very soon, with an intended goal of 300 over the next 5 years. You can thank me in advance unless of course someone already beat me to the punch! May be interesting to keep an eye on…

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Anonymous
November 22, 2007 8:32 pm

Check out microsofts insider trading, Bill Gates and company selling a lot of shares over 8 million in the last 21 days.

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