This is a right of passage for Home Inns and Hotels Management (HMIN), China’s biggest budget hotel chain. Morgan Stanley (MS) has put China’s fifth largest budget hotel chain, Shanghai Motel Chain, up for sale and like any good investment banker is trying to get a bidding war started. So far Home Inns and France’s Accor hotel giant have expressed interest. The initial price of $1 billion for Shanghai Motel Chain’s 276 hotels and 40,000 rooms strikes me as steep. Outside analysts say a reasonable price is more like $400 million. (Morgan Stanley owns 59% of the chain. The bank is selling that stake and the 30% of the company owned by founder and CEO Shen Feiyu.)

Can Home Inns show its management chops by either working the bid down or walking away if the price is wrong? Or will the company just go for the growth no matter what the cost? What the company does will tell investors a lot about its maturity.

Home Inns has got the money. It has brought in investors such as Sequoia Capital to increase its firepower. And on March 7 the company announced 2010 revenue of $480 million (up 22% from 2009) and operating income of $80 million, up 113% from 2009. Operating cash flow came to $136 million in 2010.

But the company has also got a very full plate. Read more

Should you be getting your portfolio ready for Christmas?

If you’re like a lot of us, you’ve noticed that the stocks to own in this rally were things: commodity producers and the companies that made machinery for commodity producers. Brazilian iron ore miner Vale (VALE) was up 23% from the August 26 low to the October 29 close. Copper and gold producer Freeport McMoRan (FCX) was up 41% in the same period. Mining equipment maker Joy Global (JOYG) was up 32%.

I’m not urging you to dump those stocks out of your portfolio now. I think they should continue to do well in the fourth quarter as growth in the world’s developing economies drives demand for physical commodities and as a declining U.S. dollar and rising fears of U.S. inflation drive demand for commodities stocks.

But I do think it’s time to see how far your portfolio has drifted (Like Mae West: “I was Snow White but I drifted.”) toward an excessive allocation to a sector that is, whatever its prospects, more expensive than it was two months ago. And to add a few positions in a sector that has been largely overlooked in this rally and that is likely to do surprisingly well this quarter.

I mean retail.

This is retail’s time of year for lots and lots of volatility. The holiday shopping season is the time when retail stocks do really, really badly—if expectations are high and actual results are disappointing. And it’s the time when retail stocks do really, really well—if expectations are low and the actual results are surprisingly strong.

And that’s where I think we are this year. Read more

Update Coach (COH)

(I’m on vacation until August 24. During that time Jubak Picks will operate on a reduced schedule of one or two posts a day. I will resume a full posting schedule after I return.)

For a while the slowdown in North American sales—because of the U.S. recession–obscured exactly how good a job Coach (COH) was doing at cutting costs and expanding its business in China.

No more.

Growth in North America is back, the company announced in a fiscal fourth quarter earnings report released before the New York stock market opened on August 3. Adjusting for the extra week in the fourth quarter of fiscal 2010 versus the fourth quarter of fiscal 2009, North American same store sales climbed 6.3%.

That let the company’s strict cost cutting and China growth shine through in the earnings. (It also didn’t hurt that on a constant currency basis same store sales climbed 6% in a tough Japanese economy.) Read more