Featured Trades: (FXI), (WMT), (CMED),
(MR), (PTR), (CHL), (CYB)
iShares FTSE/Xinhua China 25 Index ETF
Wisdom Tree Dreyfus Chinese Yuan ETF
1) Exclusive Interview With Jim Trippon of the China Stock Digest on Hedge Fund Radio. Jim Trippon, of the China Stock Digest, says that investors better start scaling into China now, or risk missing the biggest economic opportunity of our lifetime. Quality growth stocks can be bought for price earnings multiples under 11, and often for 4-5 times, compared to an average 13 multiple for the S&P 500. You are already investing indirectly in the Middle Kingdom whether you realize it or not. Just take a stroll through Wal-Mart (WMT).
Jim has been publishing his widely followed China Stock Digest for six years, running a full time group of analysts out of offices in Shanghai, Hong Kong, and Houston. Financial markets in China are still primitive, with no options or futures, short selling, international accounts, arbitrage, spotty disclosure, and tough currency restrictions. Individuals account for up to 70% of turnover, compared to only 10%-20% in the US, which can lead to higher highs and lower lows in share prices.
Jim overcomes many of these obstacles through buying US GAAP audited, Sarbanes-Oxley compliant, American listed ADR’s, or Hong Kong listed ‘H’ shares. Although these shares correlate highly with the US equity markets, a stock picking strategy focused on undervalued names will outperform over time with reduced volatility. This eliminates the need to reach for returns by taking on inordinate risk. Jim won’t touch a company unless he sees a ’3-5 bagger’ in it.
Recent moves by Chinese authorities to remove restraints from the renminbi, or Yuan (CYB), give investors a potential double play. Rising share prices fueled by the steroids of an appreciating currency can create a ‘J’ curve effect for profits, much like I saw in Japan during the eighties.
Trippon blithely dismisses claims by naysayers, like Jim Chanos of Kynikos Associates, that a real estate induced crash in China is imminent (click here for my piece). Buyers in the mainland cities are required to put down deposits of 30-40% which they are unlikely to walk away from. This enabled the Mandarins in Beijing to spend their $500 billion reflationary budget last year on infrastructure instead of bank bailouts. If only they’d thought of that in the US! A GDP growth rate of 9% last year compared to an American economy that shrank, also tends to bail out a multitude of sins. If you need more reasons to invest in the Middle Kingdom, please read ‘How China’s Economy is Already Bigger than the US by clicking here.
Jim posts a model Chinese portfolio on his website for subscribers, and revealed a few of his favorite names. China Mobile (CHL) has a domestic monopoly, with more cell phone customers than the entire US population, and is still clocking impressive growth. Huge swaths of the country are leapfrogging land lines and going straight to mobile. PetroChina (PTR) will make a killing from the upwardly mobile, exponentially growing car market. China Medical Technologies (CMED) and Mindray Medical International (MR) will benefit from the extension of health services into the country’s rural hinterlands.
Trippon admits to being an out of the closet scripophilist, and includes in his collection share certificates for the Titanic and the original Standard Oil Trust and bonds from the Revolutionary War. I confessed my own orientation in this direction, and admitted my holdings of shares in the Trans Siberian Railway, bonds for the construction of the Golden Gate Bridge, and a collection of Japanese wartime occupation currency from throughout Asia.
Jim started out his career as a CPA with Price Waterhouse, advising the pension programs of companies like Exxon and Shell Oil. He then struck out on his own to found one of the most widely read investment newsletter families in the US. They include the ETF Profit Report, the Dividend Genius, and the top rated China Stock Digest. Jim has published two books, Stay Rich Forever: Retirement Planning Secrets of Millionaires and How They Can Work for You, and Becoming Your Own China Stock Guru: The Ultimate Investor’s Guide to Profiting From China’s Economic Boom. To learn more about Jim, you can visit him at his website at http://www.chinastockdigest.com/ .
To listen to my interview with Jim Trippon on Hedge Fund Radio in full, please go to http://madhedgefundradio.com/ and click on the ‘PLAY’ arrow in the top right corner. Or, you can download it to your iPod.