It’s Time to Get in the Game

Today the market is experiencing its fifth down session in a row. This is both good and bad.

It’s bad in that a correction will dust up some of your current holdings a bit, at least temporarily. But it’s also good in that it presents new opportunities.

One of them is NetEase (Nasdaq: NTES).

Based in Beijing, NetEase is a leading gaming and technology company in the world’s fastest growing major economy. It’s finding a huge market in China for entertainment, sports, news, finance, technology, classifieds, shopping and even matchmaking. But its real moneymaker is gaming.

Last year, Activision Blizzard (Nasdaq: ATVI) released the third installment of the wildly popular role-playing game called “World of Warcraft,” where humans battle elves, goblins and dragons. It sold more than 4.7 million copies around the globe in its first month. And its Chinese partner for the release is NetEase. World of Warcraft is already one of the most popular online games in China.

I don’t play these games myself – and you may not, either. But don’t make the mistake of thinking millions of others aren’t. They’re called MMORPG or massively multi-player online role-playing games. There are 13 million people around the globe playing this one alone. And the game will account for more than a third of annual revenue at NetEase this year.

The revenue isn’t insignificant. Sales at NetEase over the last 12 months topped $2 billion.

However, the company is also offering several other Internet services – its news, shopping and search site is the twenty-seventh most-viewed site on the planet – and developing other games that resonate with Chinese players.

Business is strong and growing. In the most recent quarter, earnings jumped 26% on a 29% increase in revenue. Operating margins are a whopping 46%. Management is earning an impressive 28% return on equity. And the company is sitting on more than $2 billion in cash with no debt.

This company’s business prospects are excellent. I expect NetEase to earn $5 a share this year. That makes the stock attractive at its current price of less than 12 times prospective earnings.
Expect the stock to rally in anticipation of a surprisingly strong earnings announcement on May 14.

***Action to Take***

Buy NetEase (Nasdaq: NTES) at market. And place a sell stop at $45 for protection. Speculators may want to take a look at the September $70 calls. But don’t pay more than $2.00.

Elsewhere in our portfolio, our Mindray Medical April $30 calls have more than doubled. As we’re getting close to expiration, go ahead and sell your position to lock in profits now.

If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or email: viptrader@oxfordclub.com, or call Pillar One Advisor Rick Pfiefer at 800.438.3040 or 407.667.4729.

Current Portfolio:

Stock: NetEase (Nasdaq: NTES)
Country: China
Current Price: New
Comments: Buy at market. Set sell stop at $45.

Stock: New Oriental Education (NYSE: EDU)
Country: China
Current Price: $27.14
Comments: Buy. Sell stop is $23.

Stock: Michael Kors Holdings (NYSE: KORS)
Country: Hong Kong
Current Price: $45.23
Comments: Buy. Sell stop is $40.

Stock: HDFC (NYSE: HDB)
Country: India
Current Price: $33.82
Comments: Buy. Sell stop is $27.

Stock: Avago Technologies (Nasdaq: AVGO)
Country: Singapore
Current Price: $37.71
Comments: Buy. Sell stop is $34.

Stock: Mindray Medical International (NYSE: MR)
Country: China
Current Price: $33.46
Comments: Buy. Sell stop is $30. Sell April $30 calls.

Stock: Ultrapar Participacoes (NYSE: UGP)
Country: Brazil
Current Price: $21.69
Comments: Hold. Sell stop is $21.

Stock: Baidu.com, Inc. (Nasdaq: BIDU)
Country: China
Current Price: $149.63
Comments: Buy. Sell stop is $120.

Stock: Dr. Reddy’s Laboratories (NYSE: RDY)
Country: India
Current Price: $33.45
Comments: Buy. Sell stop is $28.

Stock: China Mobile (NYSE: CHL)
Country: China
Current Price: $53.72
Comments: Buy. Sell stop is $44.