Name That Trade – Chortals: SINA & SOHU

by Dan September 24, 2014 3:29 pm • Commentary

This morning I took readers on a walk down memory lane describing how people in the late 1990s got onto the world wide web, through portals with names like,, and (read here). Well, a few years behind us, China had its own group of Chortals like and While Yahoo still exists from our dotcom bubble, there seems to be less and less need for most people in a social media world to need a landing page on a browser to navigate the internet. But I’m in a nostalgic mood and Chinese internet stocks are back on people’s radar because of the Alibaba IPO.

I thought I’d take a look at SINA and SOHU.  Interestingly enough, just as Google caused the death of the internet portal in the States in China, the rise of Baidu’s (BIDU) search engine and subsequent market share dominance put an end to the Chortals’ dominance. But like YHOO here, it’s not like they went out of business.

I am not of the mindset to look to buy the biggest losers of the latest leg of the bull market at a time where momentum appears to be waning, but the set up in SINA and SOHU looks a bit interesting.

Technically, SINA is a few % off of the 52 week lows made in May, down 47% on the year, and down 70% from the all time highs made in 2011:

SINA 5yr chart from Bloomberg
SINA 5yr chart from Bloomberg

Options prices are near all time lows for the period:

SINA 4 year chart of 30 day at the money IV from Bloomberg
SINA 4 year chart of 30 day at the money IV from Bloomberg

SINA has a market cap of just below $3 billion, despite expected sales of $770 million in 2014 which are expected to grow 22% in 2015 to almost $940 million.  On a price to sales metric the stock trades about 3x next year.  What’s also a bit shocking is that the company has $2.3 billion in cash, and only $800 million in debt.

Back in April Sina spun off Weibo (WB), their mico-blogging site (think Twitter) in a U.S. IPO, and despite poor stock performance in the ensuing months, WB still has a market cap of $4 billion, more than 30% more than SINA.   There has been an obvious “China” discount placed on almost every other Chinese internet stock that isn’t Alibaba or Baidu, but these stocks look cheap.

But to be fair, there is a lot more work to be done here. But something makes me think it may be time to take a shot on the long side in these. I’ll do a little more research and look at some structures and check back in this week.