Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: A day after shares spiked on a promising earnings report, Chinese online retailer Vipshop Holding (NYSE: VIPS ) fell as much as 16% today, on concerns about new leadership in China.
So what: Vipshop gained 10% yesterday, after it reported revenue growth of 197% and its first quarterly profit at $0.01 a share. Analysts were expecting a $0.07 loss. Today, a host of Chinese stocks fell, and the Shanghai Composite was down 1.2% as the new leadership under Xi Jinping is unlikely to pull out the same stimulus measures that the former administration used to increase expansion. China's GDP is expected to grow by 7.7% this year, its slowest rate since 1999.
Now what: Today was the second straight drop of 1% or more in the Shanghai index, so the pullback in Vipshop shares is likely coming from that macro news and the exaggerated bump yesterday. Since the early morning lows, shares have bounced back to close out the day with just a 7% loss. Considering the company hit breakeven in its latest report, and is sporting a phenomenal growth rate, I would take today's drop as a buying opportunity. A few more quarters like this one, and shares should surely move higher.
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