Country Style Cooking Shares Popped: What You Need to Know
Sat, 11/12/2010 - 12:33 by Rich Smith
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: Can I call 'em, or what? Just a few days ago, I gave the thumbs-up to Country Style Cooking's (Nasdaq: CCSC)dream of becoming the McDonald's of China, and named the stock "most likely to bounce." Now it's done just that, with its shares leaping 12% this morning, popping like a wet wonton dropped into hot oil.
So what: But I haven't seen anything in the news to explain the jump. Seems only two things have happened since I spotlighted the stock Monday: First, Forbes mentioned yesterday that Sequoia Capital China owns the stock. (Big whoop. Fact is, Sequoia's owned a piece of Country Style since September 2007.) Second, China investor Robert Hsu apparently recommended the stock last night.
Now what: But hey, we're not complaining. A 12% profit is a 12% profit. Still, it's worth bearing in mind that all that's really changed here is that a stock that was already looking pricey at 57 times earnings is now 12% more expensive. The business's prospects have not changed; only investors' opinion of those prospects. I'm still of the opinion that this is a gut call. Valuation doesn't even enter into this equation. Country Style will either win big, justifying the premium price investors are paying for it, or it'll flame out, taking your hard-earned savings with it. Whether you grab today's profits and run, or stick around in hopes of a second helping, depends entirely on the strength of your stomach.
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