Gaming Is a Safe Bet

The Chinese love their games. That shows in Sohu.com's (Nasdaq: SOHU  ) fourth-quarter earnings -- and in the stock price. This rare duck has actually gained more than 9% over the past year, while most of the competition has swooned along with the broader market. "Why is that?" you ask. Sohu simply delivers explosive growth, come what may.

Recession or not, the online gaming giant reported 86% higher earnings year over year, at $121.6 million. Earnings exploded to $1.45 per diluted share, nearly quadrupling the company's year-ago $0.39 per share.

And let's not fool ourselves here: It's all thanks to the insatiable Chinese appetite for games. Management proudly points to a 40% year-over-year increase in brand advertising revenue. But you can see that even that swift increase trails the company's total revenue gains. So unlike Google (Nasdaq: GOOG  ) , Sohu’s real story lies elsewhere.

Tian Long Ba Bu -- Demi-Gods and Semi-Devils, according to some sources, or Dragon if you ask Google Translate -- based on a best-selling series of novels with overtones of Buddhist mythology, is the company's biggest revenue generator. This Chinese analogue to Activision Blizzard's (Nasdaq: ATVI  ) smash hit World Of Warcraft contributed $53.4 million to this quarter's sales, 2.4 times the year-ago figure and a stunning 44% of total revenue.

This company is sitting on a golden egg that's just started to hatch. As the Chinese dragon wakes up and connects to the Internet in staggering numbers, online gaming providers like Sohu, Sina (Nasdaq: SINA  ) , and fellow Rule Breakers pick Baidu (Nasdaq: BIDU  ) will reap massive growth like this for years to come.

Further Foolishness:

Sohu.com, Google, and Baidu are Motley Fool Rule Breakers picks. Sina and Activision Blizzard are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio; The Motley Fool is investors writing for investors.


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