Avoid the American
Shortcut to Chinese Growth By Chad Shoop, Investment Analyst Dear Sovereign Investor, Excitement is building for Alibaba, particularly after the company completed the filing for its initial public offering. The Chinese e-commerce behemoth has dominated financial headlines for a couple weeks now, creating a buzz for a variety of companies within emerging markets.
But what is it exactly that has U.S. investors fixated?
Well, I can tell you it's not the business operations alone. They can already invest in Internet giants Yahoo!, Google, eBay and Amazon.
Instead, it's the 600 million Chinese Internet users that have investors salivating. Who can blame them? That's where the growth is. Many investors see Alibaba as the quick and easy way to invest in growing consumer demand within the world's second-largest economy.
There's just one problem: Alibaba isn't the way to play it. Advertisement
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The Project to Restore America has spent months vetting the many Senate candidates to come up with a Top 10 Senate Picks 2014 list of candidates. If these individuals are elected, they should significantly contribute to getting this country back on a path of fiscal sanity. Sasse is on the list along with nine others. To find out who they all are, click here… Alibaba is already a massive conglomerate, larger than eBay (NASDAQ: EBAY) and Amazon (NASDAQ: AMZN) combined. The Chinese company is an e-commerce powerhouse, capturing approximately 80% of all online commerce in China, which is poised to keep growing. According to a recent report from KPMG, China's e-commerce sector is expected to be bigger than the U.S., Britain, Japan, Germany and France combined by 2020. The firm also offers an online messaging service and a cloud computing business.
However, most of the demand created by the financial media frenzy is going to be priced in by the time the shares hit the market.
Simply put, if you are trying to capture the type of growth that China and many of the emerging markets have to offer, Alibaba won't do it — you need to invest early and in the local market to capture significant financial gains. Invest in Growth, Not Hype Don't get me wrong, Alibaba could be a promising company. Even though Alibaba left a lot of questions unanswered about its operations and structure, those 600 million Chinese consumers will still continue to buy an increasing number of goods — and that will benefit the company. A recent McKinsey & Company report estimates that the middle class in China will continue to grow well into the next decade. In 2000, just 4% of urban households in China earned a middle-class wage, but the report reveals that over 75% of urban households will join the middle class by 2022. The growing wealth in China is a boon for many retailers.
But Alibaba is just a middleman in the e-commerce market, and competition is building. Baidu and Tencent are spending billions to go head-to-head with Alibaba.
And that's why Alibaba is going public — to raise more capital to spend and compete with its two largest competitors.
While investors are eagerly waiting to buy into the hype, they are missing the boat when it comes to capturing the opportunities that are available in Asia's growing market.
As Jeff Opdyke has pointed out, Wall Street is notorious for promoting slick multinationals that trade on the U.S. stock exchanges as the best way to play growth in emerging markets, but they are only cheating investors out of real gains.
In fact, Jeff stated that,"If brokers cared about your wealth, they would tell you about the real growth opportunities in local companies trading directly in overseas markets." Emerging Markets are Where to Find Growth The reality is that you don't have to wait for Alibaba to go public to invest in China's growth. Jeff has been doing it for decades.
Through his "boots on the ground" research, Jeff brings his experiences and unique opportunities to Profit Seeker subscribers.
While investors are fixated on analyzing the 345-page document Alibaba filed with the SEC, Jeff is busy digging up other fast-growing stocks to introduce to his subscribers.
Take one of his previous recommendations as an example. He recommended Tong Ren Tang, a Chinese medicine company that is essentially the Johnson & Johnson of China — and we all know how well J&J benefited from the rapidly growing American emerging middle class. During his two-week research trip throughout Asia, Jeff asked the locals — cab drivers, receptionists and his translator — what medicine to take if they had a headache. They all had the same answer: Tong Ren Tang.
And after meeting with executives, he knew the company had huge potential. Despite its popularity, it still had significant growth ahead. In fact, the company, at the time, had plans to more than double the number of pharmacies it was opening.
In the end, Tong Ren Tang gave his readers a 173% gain.
If there is one thing you should glean from the hyped-up Alibaba IPO, it's that overseas is where the growth is – but you need to play it overseas to take advantage of the real share price growth that can happen. Regards,
Chad Shoop
Investment Analyst P.S. You have a unique opportunity to learn more about your investment options are when it comes to playing emerging markets. Jeff Opdyke along with a bevy of other experts will be speaking at the Total Wealth Symposium in September. Click here to see the full schedule as well as take advantage of our early-bird pricing. Check it out now because the price goes up next week! | |
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