Giant Interactive (GA): Beautiful chart and handsome dividend

By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 5/28/13 Sign up for free Cabot Wealth Advisory

My stock pick for today is a Chinese game company with a beautiful chart and a handsome dividend. It’s Giant Interactive (GA), an online gaming enterprise that offers both free-to-play and pay-to-play massively multiplayer online games that are played on networked game servers.

The company’s 13 games include titles like ZT Online, ZT Online PTP, ZT Online Greed Edition, King of Kings III, My Sweetie, Giant Online, Dragon Soul, XT Online and The Golden Land. Giant makes money be selling prepaid game cards and game points that can be used within the games themselves. Games are also licensed to game operators in other countries, but in revenue terms, that’s a 3% sideline.

Investors have known about China and its huge game-playing population for years, but there have always been obstacles to success. Sometimes it was the government’s disapproval of time-wasting diversions, and sometimes it was companies’ failure to keep their game lineups fresh.

But Giant Interactive’s chart shows that investors are finding a lot to like. The company pays a nice dividend (forward annual yield is 5%) and GA trades at an attractive P/E ratio of just 9.

The stock traded near 3 in late 2011, but has rallied to a new multi-year high above 8. That stock price is too cheap (and the float of just 93 million shares is too small) to let many institutional investors take the kind of giant bites they prefer, but it’s just fine for individual investors with a sense of adventure. If you can grab a small position in GA near 8, it should give you an interesting ride.

And if you’d like to hear about more intriguing and unfamiliar stocks like GA, you can always take a subscription to Cabot China & Emerging Markets Report (which I write). There are always strong international stocks to add some spice to your portfolio. Click here to get started.