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June 8, 2006

NetEase is not SleepEase; yet, Thurs., June 8, 2006, 2:02 PM

By far the biggest risk in the Cara 100 is a relatively small China tech company called NetEase (NDQ: NTES). Even Shanghai Fly could not help with this one.

But with an open mind, I went through all the China tech companies and looked at the financials, the management, the business model, the performance to date, and so forth, and discovered this one.

I didn't read about it from some tout. I just decided that I'd make this one a member of the Cara Global Best 100 Companies list.

What got to me was here is a young group of home-grown techies who know what the market in China wants, and they are developing it from the bottom up. If they are good, they are going to be great.

They may crash and burn mind you, but those are risks I'm prepared to deal with as I journey the world of capital markets.

I read an informative piece from MarketWatch today that gave me a little more insight into this small company. Of course I'm not close yet to truly understanding what is going on at NetEase, but I'm happy to see that the writer did not trash my pick.

GICS 45 NetEase.com (ADR) (NTES) (NTES) Financial Data

I'd be happy to hear from somebody in China who plays the new game Datang Haoxia to tell me if they think NetEase has got a winner. Since China ranks either country #4 or 5 in the readership of this blog, there should be a few people there I can count on for research.

I'd like to think there were a few million, but that is a story for another day. :-)

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Update: 3:55pm --

I have just read the Ned Davis Research Report on NTES, which unfortunately I cannot reproduce (copyright), but I can tell you they have it rated in the favorable zone (technical model) and low risk zone (fundamental risk model). It is rated at 100.0 pct (the best) out of 15 in its industry, at 97.1 pct in the technology sector.

So I am not alone. Hooray for that.

Posted by Posted by Bill Cara on June 8, 2006 02:02:36 PM | Category: 45 Info Technology , Cara Global 100 Best Companies , China

Discourse

Bill-

It seems traders in the States here think they are immune from what is affecting the rest of the World.

DJ Stoxx 50 3,240.06 -85.58 -2.57%
Bloomberg
European 500 220.73 -6.05 -2.67%
FTSE 100 5,562.90 -143.40 -2.51%
DAX 30 5,383.28 -160.65 -2.90%

So how does Asia's actions and that of Europe square with the "Let's rally this thing back up!" crowd that has ahold of the market right now? Dow now has recovered half it's losses. Are we in denial here? Are our traders just that much more optimistically blind?

Posted by: MarkM [TypeKey Profile Page] at June 8, 2006 2:11 PM [link]

MarkM-I think the gnomes know how important a "strong" close is for the market (assuming they want to unload some more inventory). If the market tanks in the final hour all hell could break loose tomorrow. I don't believe they are finished unloading all their inventory so they would want the market to stabilize. As an aside, the five day trin reading hit 8.5 today a very oversold reading even in bear markets and option expiration weeks tend to have an upside bias so maybe the market puts in a short term bottom early next week. Unless we are the midst of a third wave down this type of downside momentum will begin the lessen. Am still bearish but recognize they will send the PPT if it fits their game plan. Goldminers are beginning to look interesting.

Posted by: optionoracle [TypeKey Profile Page] at June 8, 2006 2:39 PM [link]

optionoracle-

Sure but how do you square that with how the traders elsewhere are pricing their equities? What you are saying is that our market contains more GAMESMANSHIP. Okay, but how long can that last.

Posted by: MarkM [TypeKey Profile Page] at June 8, 2006 3:36 PM [link]

MarkM-If the gnomes want to distribute stock they often support the DOW 30 to mask underlying weakness in the broad market. When world markets become unsettled money flows to safe havens and away from risk. Our markets are perceived as less risky so they have an easier time propping up the US market. Of course this cannot go on forever-it is a short term manipulation. The four year cycle will bottom late this year or early 2007. The longer they hold the market up the worse the resulting downside action. I see a retest of the Oct 2002 lows on the horizon.

Posted by: optionoracle [TypeKey Profile Page] at June 8, 2006 4:10 PM [link]

If you are interested in NTES you may be interested in CRY.TO or CRYP.N. It seems to me that the fundamentals of Cryptologic ( internet casino and poker sofware)are quite good but the risk as I see it is U.S. internet gambling bills previously failing but they keep trying.Another risk as I see it is that some people seem to be playing with the stock price.

Posted by: bob [TypeKey Profile Page] at June 8, 2006 5:53 PM [link]

optionoracle-

Well, XAU bounced off its 50 week moving average if that's what you mean.

That was a wacky rally with a "reversal" into energy. Not the leadership group the bulls want. Unless they were counting on PG to save the day.

Could get a little rally out of the miners here. But I'm betting it's short-lived so I'm staying out for now. I have no edge to trade.

I hear a lot of bulls calling for a big rally here. If Lowry's selling pressure was at alltime highs yesterday and buying pressure at alltime lows, where is the impetus coming from? Today's action off grossly oversold levels? I'm betting that falls short of expectations too. Just another rally to short into.

I can see overseas money flowing into our defensive sectors if they want to hide. That wasn't the case today if leadership is any indication.

Posted by: MarkM [TypeKey Profile Page] at June 8, 2006 6:39 PM [link]