It Took Two Years but Stocks on Wall Street’s Next Ten Bagger Comes by the Name of Tencent Holdings

While Western Social Media Stocks continue to crumble, struggling to meet investor expectations their biggest peer in China is performing quite the opposite, thriving and continuing to soar higher.  Facebook (NASDAQ: FB), Groupon (NASDAQ: GRPN), and Zynga (NASDAQ: ZNGA) all have hit rock bottom in 2012, failing to live up to the hype surrounding them before they went public. On the other hand, Tencent (0700.HK), China’s leading internet company and one of Stocks on Wall Street’s top performing stocks in 2012 is setting new all-time highs! Tencent Holdings recently reported strong second-quarter profits, up 32% overall as the company benefited greatly from their increasing popularity and effectiveness to draw more advertisers to their social-networking websites and their rapidly expanding online gaming platforms. Tencent has been one of the great surprises in 2012, up 55% year-to-date and we expect these numbers to keep on growing as the company has continued to show healthy growth even while the Chinese economy softens and other social media stocks struggle.

The first thing that jumps to everyone’s mind when talking about Tencent is what U.S. counterpart does it compare to? Frankly, no one and why should it, Tencent’s better than everyone else. No European or U.S. Tech Company even comes close to the size of Tencent nor does any company offer the services that Tencent does.  If you really must find a comparison then here it is. Combine the forces of Yahoo, Google, Facebook, Twitter, and Zynga all in one. What do you have? A close resemblance of Tencent but still not perfect.  If asked to describe the company in a nutshell, well here it is. Tencent is a hodgepodge of all the top online companies encompassing the likes of social media, online gaming, mobile internet, and various other online services you use on a daily base catered to the one billion users they currently have. Impressed yet? Tencent is one of a kind, no U.S. or Europe company even stands anywhere in comparison. They’re an Internet conglomerate, a monopoly of the Chinese online world as they dominate many key sectors offering an array of great services. Originally founded in 1998, Tencent first gained an online presence thanks in part to their instant-messaging platform. Since then they have developed many different successful services encompassing all parts of the online world drawing close to a billion users driving their high volume traffic to all the various segments of the company whether it’s social media, online gaming, mobile internet services, you name it.

It makes perfect sense, China is the world’s largest online market for business so it’s only right that they have Tencent, the world’s largest Internet based company, home to roughly a quarter of the world’s online users. China’s online world is dominated solely by Chinese based companies thanks in part to the strict regulations set in place by the government as they restrict U.S. or European based companies from gaining any online presence. Google, Facebook, Yahoo have all been shut out of the world’s largest online market, making Tencent the biggest benefactor to the strict government policies set in place by the People’s Republic of China.

The amazing part is while Facebook, Zynga, Groupon and many other social media stocks have continued to struggle as of late with many of them hitting 52-Week lows, Tencent has done the complete opposite. That’s right, a complete 180 degrees as just last week they set new 52-Week Highs surpassing $250 per share. So what exactly makes Tencent stand out? What gives them their competitive edge? It’s Tencent’s vast array and blend of services that has ultimately been their secret piece to the puzzle. The great combination of being able to offer everything an online user could possibly need from just one source. The great success all starts with their thriving, profitable online gaming department that is a revenue machine and a key factor to all their success. It has led Tencent’s resurgence allowing them to push through what has been sluggish times for advertisement demand, allowing them to take risks and launch new successful services propelling the company to strong robust growth and increasing revenues quarter after quarter.

Tencent’s gaming division has been all the talk and well deservedly so as it accounted for more than half of Tencent’s total revenue in the first half of 2012. The online gaming options they offer are limitless. Massive online role-playing and first person shooters are the biggest hits but even casual games are vastly popular to the billion worldwide users. The gaming options go a lot deeper offering virtually anything an online gamer could ever desire. Tencent’s online gaming services have thrived in 2012 and soared to all-time highs propelling the company to follow in a similar pattern. While the Chinese economy might be experiencing some kind of slowdown, don’t count on Tencent following any similar pattern or feeling similar effects. In fact after the most recent news and alliance all past records should be thrown out as shortly new ones will be set. What could possibly be next? How could you improve something that’s near perfect? Well it starts with three letters, COD! Ok don’t get it, lets make it simpler. Ever heard of a game called Call of Duty? It’s just a successful online gaming franchise that’s sold well over 100 million copies worldwide, currently has over 40 million active paying monthly online users who clearly have no lives as together they have totaled close to 2 billion hours of online gameplay. Well sounds like the perfect match and that’s just what Tencent and Activision, Call of Duty’s creator, were thinking when they teamed up with the goal of bringing  the epically popular online gaming franchise, Call of Duty to China. This deal is a goldmine for both companies and the potential is so lucrative it’s scary to think how strong Tencent’s Online Gaming Department could grow. It’s like putting the previous online gaming services on steroids.

The fact is while the online gaming department will continue to be a cash cow bringing in record profits they won’t even be the greatest benefactors from it all. Nope, the biggest winners will be Tencent’s other successful online services. The social media, mobile internet, various other successful services will be the ones to benefit most. Why might you ask? Well while Tencent’s gaming department will bring in all the money continuing to grow enormously year by year it will only further allow Tencent to invest and create many new successful online services while continuing to grow and develop their already well-established ones. Steady gaming revenue has allowed Tencent to continue to invest in many different sectors creating strong future growth opportunities to carry the business further even if gaming were to ever slow down, something most analysts find hard to ever imagine. Tencent is privileged with being in the driver’s seat during times that few companies are.  Allowing them to take chances and make plays many other companies don’t have the luxury to ever embark on is an enormous growth opportunity. It can be these new services they test and develop that could be the next online gaming department or maybe just the next QQ. What’s QQ you might ask? It’s the Chinese version of Facebook, just more popular with more members and without Mark Zuckenburg and his falling stock price. And for those of you who were wondering, yes Tencent also owns QQ, just another perfect example of how many different successful online services the company already currently holds.

If you are interested in finding out more about QQ, simply click on the link to read Stocks on Wall Street’s previous article: The World’s Biggest Social Network: QQ, China’s Facebook but Bigger

They have the whole nation of China in the palm of their hand, growth opportunities galore, a perfect combination for a growing online empire. Tencent has been one of Stocks on Wall Street’s top performing stocks picks and a big winner for many of our readers who have invested in the stock since we first recommended it as a great buy opportunity and future investment on June 17^th, 2010 in our article: Picks for 3 International Markets to Watch: Brazil, India & China

Since that date, Tencent has been a big winner for all of Stocks on Wall Street’s loyal readers and followers who invested in the stock. Why? Because in a little over two years the stock is just 3% away from being what Peter Lynch calls a ‘Ten Bagger’! Back on June 17^th, 2010 the date of when we first recommended the stock, Tencent was trading at around $127 per share. Today August 21^st, 2012 before the markets opened Tencent is trading at $246.40. You don’t even need a calculator to already know that’s a great ROI but for those who like to be precise the total net yield is 97.12% in a little over a two-year span. That’s what we call a great investment and further proof on why you should always invest in best of breed companies that are strong from top to bottom. Just look at the trajectory in the chart below to see the great growth we have all witnessed:

Since the first day we mentioned Tencent as a buy the stock has been on a roll, soaring higher and quickly becoming a regularly talked about stock on our site. We’ve written many articles about Tencent whether they were our own investment analysis, regular updates, answers to questions from fans and readers you name it but I can tell you there were many times we wrote about this stock and for good reason, 97.12% total gain in 25 months! This is where we would like to say a big thanks to all our loyal readers and fans. You guys are the whole reason we exist and Tencent is a perfect example of what we love to do here at Stocks on Wall Street, find great investments and make you money. It’s a simple winning philosophy that we wish to continue to do everyday.  Wish to read more insight into all our past collection of Tencent related articles published on our site, well help yourself they’re all below for you to enjoy:

The Bulls Continue to Ride On Out Led by Emerging Markets 

Looking for Big Returns? Invest in China

Top Ten Technology and Telecom Stocks

10 China stocks to Buy in 2011: The Year of the Rabbit

The Five Most Promising Emerging Markets

Put Aside All the IPO Hype: The World’s Largest Social Network is QQ, China’s Facebook but Bigger

The most recent article we published about Tencent came just last month when we were praising Tencent the run it had just made. Two year’s of epic performance assisted by excellent business decisions putting the company in a great position to be successful for many years to come: Tencent Holdings: The World’s Biggest Social Network & One of 2012′s Top 1st Half Performers

Our Long-Term Take: If you are a current shareholder, what’s not to like? Enjoy this moment and spend your profits wisely. As for Tencent we believe all signs are still pointing in the right direction for the stock to continue to prosper and grow in the future. Long-term we have nothing but great expectations for the stock as we expect the company to continue to grow from strength to strength.

  Please Follow Us on Facebook & Twitter & Don’t Be Shy To Leave a Comment Below!

Source: