One of the more remarkable stories of recent years has been the phenomenal growth of the Internet in China. Only thirty years ago, China was seen as a hopelessly backward state. Today, it has one of the fastest-growing economies in the world.
Even after years of blistering growth, Internet penetration in China is still a fraction of what it is in the U.S. Still, many young people in China have actually become addicted to the Internet.
One of my favorite China Internet plays is Shanda Interactive Entertainment (SNDA) which just released very impressive earnings. For the fourth quarter, the company netted 72 cents per ADR which is up from 54 cents per ADR last year. Shanda beat expectations by five cents per ADR.
The company is also very efficient–operating margins are over 40%. I’m especially impressed that more than 86% of Shanda’s sales came from multiplayer online role-playing games. This company has really tapped a nerve in the youth of China, and I think its growth story has only just begun.
Shanda Interactive is a strong buy in my Global Growth service.