GLOBAL

Everything about China is big, but the economic reality of the country is that it is a landscape of different regions and markets, asserts Paul Goodwin, editor of Cabot Emerging Markets Investor.

There are few, if any national chain stores. But China’s development as a modern industrial nation was perfectly timed to take advantage of the internet in general.

Autohome (ATHM) is a China company that exists totally online; the company is providing a way for a nation with a growing number of car owners to connect dealers and customers, making up for the lack of huge auto-mile-style dealerships where U.S. buyers do their shopping.

Autohome is riding the wave of increasing automobile ownership in China; the number of car owners rose from 154 million at the end of 2014 to 172 million at the end of 2015.

Car dealers rely on Autohome as a place to set up virtual dealerships with pictures, specifications and other information about the cars being offered, financing, registration and the dealership itself. Customers can also post reviews of cars and dealers.

Revenue growth has been strong, rebounding from 59% growth in 2015 to 62% growth in 2016. Q4 results were just announced on March 2, with revenue up 76% and earnings rising 28%. Analysts project 2017 EPS growth at 7%, rising to 21% growth in 2018.

ATHM has been through a rough patch since peaking at $57 in April 2015. The stock bounced downhill to $19 in July 2016 and has been subject to sizable pullbacks during its rebound.

We like the six-week rally the stock enjoyed in January and early February and think the stock’s sideways trading since it topped $35 on February 14 is a good buying opportunity.

We will start our position with a recommendation to Buy a Half position.

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Tickers Mentioned: Tickers: ATHM

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