Buy TAL Education Group (NYSE: TAL)

Tiger Global Management owns 9.85 million shares, or about 3.5 percent of the U.S.-traded ADRs of this leading tutorial center operator in China which focuses on high-achieving students in the K to 12 curriculum. A culture that places heavy emphasis on education, the Chinese are willing to pay premium prices to give their children an edge in a highly competitive exam to enter top universities, which could determine the course of the rest of the students’ lives. It is not uncommon for a student in his or her final year of high school to spend most of his waking hours (outside of school) studying for the entrance exam. And many students literally spend most of their young lives preparing for that exam.

TAL has seen its growth accelerate recently by more aggressively adding learning centers. In its latest reported quarter alone, TAL added 60 learning centers (bringing the total to 567), way more than anyone expected, which suggests higher growth potential. The center enjoys a strong brand image and word of mouth, and enjoys almost $1 billion in deferred revenue—money collected from parents in advance—which suggests there’s a sizeable waiting list to secure a spot in TAL’s classes.  

TAL is a buy with an initial suggested buy-up-to price of $35. We will have more information in an upcoming Weekly Update.