China: Drinking, Smoking, Building, and Nuclear

China: Drinking, Smoking, Building, and Nuclear
By Glen Bradford
7/20/09

Welcome to early adulthood. Now’s the time that if you don’t understand compounding interest rates or you’ve never heard of them, they’re really working against you. You may find yourself growing wider at about the rate you were growing taller when you were 12 and your portfolio is shrinking faster than your financial advisor forecasted under the worst case scenario. My ideas below aren’t your generic Chinese plays like the two popular ETFs by iShares (NYSE:FXI) and PowerShares (NYSE:PGJ). Still interested?

Look, I’m no Jim Rogers. Grass is always greener on the other side. Asians save more money. China never was in a recession and is and has been growing at twice the fastest rate we’ve seen over here in a couple years. They still make less than us per person. They want what we have. Rumors are that their new “more entitled” generation spends more. My advice: set up a trap so that their money is funneled your way. I’ve got 4 ideas that might appeal to the “sophisticated adult.”

1. Companies that are priced cheaper than the profits that they are going to make in the next year are growing harder and harder to find by the day. In China, sipping on Chardonnay imported from California is sure to give you a sophisticated buzz. Let’s round the bases. Cheap? Yes. Growing? Yes. Sophisticated? Yes. Homerun. China Organic Agriculture (OTC:CNOA).

2. Now that you’ve got your liquor, let’s get you a pack of smokes. These smokes aren’t your typical Philip Morris (NYSE:MO) western blend. You can’t get them yet, but their cactus-based cigarettes are slotted for launch later this year. They were awarded the patent last year heading into the market crash. China Kangtai (OTC: CKGT) has 3 years of steady growth, future growth under progress and is priced to shrink. No brainer? I think so.

3. How would you feel if you could snatch up a company capable of working projects in 7-star hotels, having just announced a new agreement worth $500M all for less than $100M? Oh, don’t forget that the backlog was $136M back in March. I’ll be honest, the buildings CAE (OTC:CAEI) builds are by far some of the most advanced I’ve come across in my lifetime — and I’m an engineer.

4. Now that we built it, we have to be able to turn the lights on. Interested in going nuclear? Trading less than $10M and being the only publicly traded Chinese company with the ability to produce nuclear graphite, China Carbon (OTC: CHGI) is your ticket to profits off of China’s target of 40 nuclear reactors by 2015. They just received a $5M purchase order and have been advised by their local government to apply for a $26M loan. Rumors suggest that they have already targeted a potential acquisition target that would double revenues and income.

I’ve been told that there are two main ways to accumulate large sums of money. You can make it, or you can save it. I always take shortcuts and was always a Chinese-cutter in grade school. Today is no different. My shortcut: Successful investing allows you to make money with your savings. Where I comefrom, that necessitates not losing money. If you can take your savings, and successfully invest it, you can grow a small sum of money into a large sum of money. Sounds easy enough — now go give it a shot.