Why Shares of Jumei International Holding Ltd. Popped

Is this meaningful or just another movement?

May 28, 2014 at 5:02PM

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: Shares of Jumei International Holding (NYSE:JMEI) climbed as much as 26% today as the run on Chinese online retailers continued. 

So what: Jumei, China's No. 1 online retailer of beauty products, went public on May 16 at a stock price of $22 and had been trading relatively flat before today's jump. Today's gain did not seem driven by any particular news item, though it followed a 15% spike by fellow Chinese e-commerce player JD.com yesterday. With JD.com shares soaring after its IPO last week and investors anxious for the anticipated debut of Alibaba later this year, enthusiasm seems endless for Chinese e-commerce stocks.  

Now what: The run on these stocks looks to be driven largely by momentum traders, and could lead to a bubble. At a P/E of 152, Jumei shares aren't cheap; while there is a huge market opportunity in Chinese e-commerce, with 27% growth expected this year, that doesn't mean investors should buy at any price. Jumei shares could easily move higher, but I'd be wary of stocks driven primarily by short-term traders, as shares could fall just as fast as they have risen. 

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4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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