For more than a year we have been hearing about stimulus plans, bailouts, and rescue packages, yet the recovery still isn't felt. Well, except for one place, China. Last November China announced a $585 billion stimulus plan in a monumental effort to quell rising unemployment and civil unrest. Fortunately for them, the plan seems to be working.
While the glut of government debt may, and should, cause some concern about long-term validity, there is definitely some short-term returns coming from China. Many projects are getting quickly approved and the effects are prevalent.
For the first 4 months of 2009, Chinese investments have climbed over 30% according to a national statistics institute. The growth for May alone was 40% on a year-over-year basis. Spending on fixed assets like transportation and real estate have softened the effects of the weak economy brought on by slow exports.
So how can we benefit from this? The short answer is to buy any stock based in China, but the better answer is to target stocks specifically tied to the recovery and of course, use the Zacks Rank.
Some of the companies I currently like are: Don't be fooled by the name, American Dairy, Inc (ADY - Snapshot Report) is a Chinese company that specializes in producing and distributing milk powder and soybean products. Currently earnings estimates are calling for more than 3 times the earnings in 2009 compared to 2008. Estimates spiked to $3.34, up from $1.55, following a great quarterly report. If met, that would be 457% earnings growth. Next year is a bit more modest, but 34% is still fantastic.
Shanda Interactive (SNDA - Snapshot Report) offers a portfolio of diversified entertainment content including some of the most popular massively multi-player and casual online games in China. The #1 rated stock has had a great start to 2009, up more than 100% year-to-date. Earnings estimates continue to jump, most recently the consensus for 2009 rose to $3.32, up 40 cents in the past 3 months.
Wonder Auto Tech, Inc (WATG - Analyst Report) is a Chinese auto parts manufacturer and the leading supplier of alternators and starters in China. The company announced quarterly results on May 4 that included 19 cents, topping the consensus by 4 cents. This was the third surprise in 4 quarters. Net income was up 30% on a YoY basis to $5.2 million. Sales were up 29% to $40 million. After surging past the former 52-week high, the stock has gone on to set new highs, including the last 3 sessions in a row.
In Closing After all this talk about China, I think I am going to be getting some General Tsao's chicken for dinner tonight. Hopefully with the stocks I mentioned here and others, readers wont need a cookie to give them their fortune. Above are just a few stocks that met my criteria. Feel free to come up with your own strategies using the Research Wizard to capture the China's explosive growth.
