E-House (NYSE: EJ) was last week's biggest winner on the New York Stock Exchange, soaring 43% on continuing momentum in China's red-hot housing market.
E-House is a provider of real estate agency and information services. There was no E-House-specific news triggering the pop, but the market's enthusiasm for Chinese real estate plays is building. SouFun (SFUN) shares moved 19% higher on the week, but at least there was some news there.
JPMorgan had tapped SouFun as one of its favorite Internet stocks in China a week earlier.
SouFun is an online real estate portal, and anyone who has seen the stateside real estate websites take off this year can probably appreciate a somewhat similar model gaining momentum in SouFun.
As for E-House, its shares have more than doubled since bottoming out earlier this summer. A strong catalyst for its sharp move higher came when it posted blowout quarterly results last month.
Revenue climbed 43% to $163.4 million and adjusted earnings per share nearly doubled to $0.11 a share. Wall Street was dumbfounded, holding out for just $0.06 a share on the bottom line and $135.8 million in revenue. Naturally, E-House also raised its guidance, now eyeing a 36% pop in revenue for all of 2013.
The news has been encouraging on the housing front in China. SouFun -- yes, it's a data collector, too -- announced recently that home prices in China had their sharpest rise in August since late last year. E-House -- yes, that E-House -- reported that home prices in August were 11% higher than they were in August of last year.
The love isn't universal. Guggenheim China Real Estate (TAO) -- an ETF investing in Chinese housing players -- is trading lower in 2013. Chinese homebuilder Xinyuan Real Estate (XIN 1.35%) only rose by a modest 3% on a strong trading week for growth stocks.
The good news for investors is that it's not too late to hop on E-House's bandwagon. The stock is trading for less than 20 times this year's earnings and just 14 times next year's profit target.
That's important. I singled out the stock in last month's 5 Stocks Under $10 column when the shares crossed the $6 mark, and I don't have a problem recommending it again despite moving more than 40% higher.
Have you seen the market multiples on the faster-growing stateside housing plays? The Chinese real estate market certainly feels frothy. A bubble pop would clear investors out of E-House in a hurry. However, if China's improving economy continues to justify higher home prices, forget the homebuilders. E-House and SouFun are the places to ride this out.
