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Why Shares of Jumei International Holding Ltd. Jumped

By Jeremy Bowman – Jun 2, 2014 at 10:50AM

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Is this meaningful? Or just another movement?

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 Ltd. (JMEI) were cruising higher today, gaining as much as 12% and finishing up 7% on another momentum burst.

So what: Chinese e-commerce companies have been hot commodities of late as enthusiasm for Alibaba's upcoming IPO builds and shares have risen since its successful IPO just a week-and-a-half ago. Jumei, which specializes in beauty products, has seen its shares surge since its own debut on May 16. There was no news driving today's buying, but the industry's size and opportunity seem to ensure high valuations for these stocks as less than half of China's population are Internet users and the online retail sector is expected to grow 27% this year alone. 

Now what: Cosmetics and skin-care products are also a huge business in China, and American companies like Nu Skin Enterprises have found a bountiful market in the world's No. 2 economy. China's cosmetics market has become the second-largest in the world with $25 billion in sales and an 11% growth rate. Jumei launched its website in March 2010, but achieved $483 million in sales and $25 million in profits last year as revenue doubled and profits tripled from a year ago, and it's the market share leader in online beauty products with 22%. While investors may want to be wary of momentum plays, Jumei's financials could continue to soar, given its position at the intersection of two major Chinese growth markets. 

Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. 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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