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The Safest Way to Play China Now

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: International (Nasdaq: CTRP  ) . Are institutions bullish or bearish when it comes to this travel agency specializing in Chinese destinations?

Foolish facts

Metric International

CAPS stars (out of 5) ****
Total ratings 4,326
Percent bulls 96.1%
Percent bears 3.9%
Bullish pitches 679 out of 714
Highest rated peers Ambassadors Group, Red Lion Hotels, Universal Travel Group (NYSE: UTA  )

Data current as of Feb. 15.

We don't have exact figures for the size of the Chinese travel market, but what's happening in nearby Hong Kong may serve as a fair proxy. Last year, the region's main airport served a record 50.9 million passengers, The Washington Post reports.

More growth is coming. The International Air Transport Association estimates travel to and from and Sino Superpower will grow 11% by 2014, resulting in 181 million new domestic and 33 million new international flights. Ctrip will undoubtedly help book a healthy portion of those trips, and at an excellent margin.

Why? Unlike U.S. counterparts Expedia (Nasdaq: EXPE  ) and Orbitz Worldwide (NYSE: OWW  ) , Ctrip isn't burdened with adversarial relationships with China's airline and hotel industries. To the contrary; they seem all too happy to work with a travel agent. Mix in Ctrip's lower labor costs and it's not difficult to understand why Ctrip keeps more than $0.30 of every dollar of revenue. Orbitz, on the other hand, hasn't booked a profit in years while Expedia usually keeps $0.10 to $0.12 for every dollar it takes in.

With these advantages, I wonder if Fool co-founder Tom Gardner was being conservative when, in the pages of the May 2006 issue of our Motley Fool Hidden Gems newsletter service, he predicted that would grow to become a $10 billion company within a decade.

"I believe China, at today's valuations, looks more like the U.S. market in the early 1980s than our market does today. If I'm right, there will be some monster long-term winners, Ctrip among them," he wrote at the time. Five years later, Ctrip now commands $5.7 billion in market value.

Three times Tom picked to outperform in Hidden Gems, and he's been right in each instance. Two of his recommendations have quintupled as of this writing. The other tripled. It's a smashing Foolish success story that, judging by Big Money buying patterns, is far from over.

Institutional ownership history

Top Owners





Fidelity Investments





T. Rowe Price Group





Artisan Partners Limited





Morgan Stanley Investment Mgmt.





Lone Pine Capital










Source: Capital IQ, a division of Standard & Poor's. *Indicates the number of shares owned.

But it didn't always look this way. Fidelity's funds sold a huge block of shares -- almost 16 million -- in last year's second quarter. Fido has sold an additional 3 million shares since. Yet few institutions have followed its lead.

Most bought more instead. For example, T. Rowe Price (Nasdaq: TROW  ) more than tripled its stake in Ctrip following the Fidelity sell-off. Ken Heebner's CGM Focus (CGMFX) purchased 2.2 million shares last fall, Morningstar reports.

Competitor and peer checkup


Institutional Ownership

Insider Ownership 85.66% 1.81%
eLong (Nasdaq: LONG  ) 9.44% 7.02% (Nasdaq: PCLN  ) 98.77% 1.23%
Universal Travel Group 29.62% 33.75%

Source: Capital IQ. Data current as of Feb. 15.

Color me unsurprised. Ctrip has one of the better ownership profiles among its peer group. Insiders haven't completely abandoned the stock. Three of the company's co-founders own a combined 1.8% of the business.

Institutions also have yet to fully commit to Ctrip. While I'd prefer to see them owning less than 85% of the business -- closer to 65% would be best -- there's still room for new Big Money buyers to get in. Not so at, where institutions already own close to 99% of the shares outstanding.

And they will want in. Globalization can't help but spur demand for more overseas travel, especially to China. With a reasonable price, excellent margins, and engaged founders, offers the best way to play the trend.

Do you agree? Disagree? Let me know you would rate International using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

Interested in more info on the stocks mentioned in this story? Add, eLong, or Universal Travel Group to your watchlist.

Ambassadors Group and are Motley Fool Hidden Gems picks. is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Ambassadors Group and T. Rowe Price and is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.

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Tim Beyers

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at or send email to For more insights, follow Tim on Google+ and Twitter.

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