eLong's potential for greatness - Investing in China

In the recent months, there has been a lot of hype over China - investors question what stocks they should buy to reap the benefits of China's emerging economy. There are over 200 stocks traded in the U.S. and Canada that have the word "China" in the company name. It's a gold rush for investors to find the right publicly traded companies in China which will make them rich beyond their wildest dreams. Just start a company, include "China" in the name, and people will throw their money at you. So how do you know which company to buy when you don't live in China, only read about it in the news, and have to put your faith into investment articles?

Shaun Rein from the China Market Research Group wrote an insightful article recently about China's Baby Boomers that are igniting their economy. It's China's Generation X that has the money to spend and they are enjoying their life like no other generation has been able to do in China's history.

Here at the Stockmasters, we have found a 'China' stock that we think has a lot of potential. No, it's not China Milk Products , it's eLong, Inc. (LONG)
If you haven't heard the eLong story yet, it is an interesting one. Expedia Inc. (EXPE), the largest online travel company in the world, is eLong's controlling shareholder, with approximately 52% of the company's equity. Barney Harford was recently named chairman of eLong, he is President of Expedia Asia Pacific and has been a board member of eLong since August 2004. Chinese online travel company eLong expects revenues for the fourth quarter to range between $9.2 million to $9.6 million, up 26% to 31% compared to the same period last year, according to the company's third quarter report. eLong's Q3 revenue was up 40% yoy, but revenue guidance for Q4 was below analyst estimates and Wall Street has been punishing the share price from $15 - down to $13.

We're not incredibly impressed by the revenue eLong, Inc. is producing right now, but the sheer potential of this stock is mind-blowing. Expedia.com raked in $2.2 Billion in revenue the last year -- Priceline.com (PCLN) one of Expedia's main competitors, brought in $1.2 Billion. China is now the nation with the second largest number of internet users almost 120 million as of last year. The internet is going to explode in China and when they really start booking travel online, you can bet eLong is going to benefit. Let's not forget about Macau China becoming the new Las Vegas, and what better site could exist for the Chinese to book travel arrangements to the Sands Macau (LVS) or Wynn Macau (WYNN).

If you've been living under a rock and haven't been following the Las Vegas Sands (LVS) or Wynn Resorts (WYNN), the one year charts speak for themselves:

China is a nation that's a million times more populated than ours, I can't help but think there is huge growth potential for eLong. We don't see eLong's stock price taking off like Baidu.com (BIDU) (which happens to be dangerously overvalued), but over the next five years it's a good long term investment. And that's the whole reason why investors aren't saying Marsha, Marsha, Marsha, it's CHINA, CHINA, CHINA, all the way to the bank.

Article written by: Phil McCallister
Article posted on: December 8th, 2006