Guess we weren’t off the mark at all. It was a bulls-eye. Since we recommeneded this stock in July 2007, shares have taken off. Kongzhong (Nasdaq: KONG) shot up 71% today to 8.52 today. Peer stocks such as Linktone (Nasdaq: LTON) and Hurray (Nasdaq: HRAY) also participated in the rally, but did not benefit as much as Kongzhong.
At this point, I would no longer rate shares as a buy. In fact, I’d even consider selling at least some of your shares, and holding on to the rest. One day gains can often be fleeting short term.
The reason for today’s climb:
Chinese stocks trading in the U.S. rose, pushing the benchmark to a record, as speculation that fixed-line carriers will be allowed into the mobile phone business boosted the prospects for wireless entertainment companies such as KongZhong Corp. Inc., Linktone Ltd. and Hurray! Holdings Co.
The Bank of New York Co.’s China ADR Index, which follows China’s American depositary receipts, climbed 4.1 percent to 568.01, the highest since at least December 2001.
Investors were buying stocks in Chinese companies that may supply content such as games and ring tones to the fixed-line carriers as they enter the mobile business, said analyst James Lee at WR Hambrecht + Co. China BAK Battery Inc., whose rechargeable batteries are used in mobile phones, may also be rising on demand from mobile users for improved performance.
“There are expectations that landline carriers may be entering the wireless space,'’ said Lee, who has a “hold'’ rating on Beijing-based KongZhong. “There is speculation that these fixed-line carriers may partner with companies like KongZhong, Hurray and Linktone to get into data services.'’
The country’s National Audit Office said earlier this week that a review of five phone operators will start next month, fanning speculation that the government is preparing for an overhaul. China’s government may seek to merge domestic operators, the Financial Times reported last month, citing an unidentified China Telecom official.
Shares of KongZhong jumped $3.55, or 71 percent, to $8.53. Linktone rose 80 cents, or 26 percent, to $3.85. Hurray gained $1.18, or 25 percent, to $5.82.