For all the magazine covers trumpeting the achievements of its red-hot economy, China has the second-worst performing stock market in the world this year. Since peaking at 2241 in 2001, the Shanghai composite index has slumped more than 50%.
As Tim Clissold, author of the highly acclaimed Mr. China, pointed out at a recent London Junto, few foreign investors are generating any profits in China, despite all the hoopla.
Yet there are a handful of savvy market players who are bucking the trend. Master investor Warren Buffett has made a pretty penny investing in Chinese oil giant PetroChina over the past few years.
So have investors in China Mobile, the Beijing-based company that is the No. 1 operator in the world’s biggest mobile phone market — and this week’s Global Bull Market Alert pick. While the Chinese market is down 18.9% in dollar terms this year, China Mobile is up over 50%.
Here’s why we think investing in China Mobile is the best way to tame the Chinese dragon, and why it will continue to generate double digit returns for investors:
First, China Mobile’s growth and size are simply breathtaking. With its 239 million subscribers, it is within striking distance of overtaking the population of the ENTIRE United States. China Mobile added close to 8 million subscribers in September and October alone. That’s equivalent to the population of Sweden in two months. Since the beginning of the year, China Mobile has added 34.5 million new subscribers. Picture every California resident signing up for mobile phone service with a single company in just 11 months. And within five years, the number of mobile phone subscribers in China is predicted to rise to 600 million.
Second, the overall telecommunications market on China is on fire. Annual revenues have reached $30 billion dollars, an increase of more than 20 percent from last year. Mobile phone sales increased by an even more impressive 30%. As the leading cellular service in China, a significant portion of this revenue goes straight to China Mobile.
Third, Beijing is about to issue licenses for 3G, a new broadband bandwidth that is coveted by mobile operators around the world. China Mobile is almost assured of getting a license. With Beijing hosting the 2008 Olympics, it will do everything in its power to showcase its remarkable progress to the world. Granting a 3G license to China’s biggest mobile phone operator will be part of that effort.
So buy China Mobile (CHL) at market today, and place your stop at $21.50. If you want to play the end-of-year tech rally for quick profits, buy the $25 March options (CHLCE.X).
Note: We’re moving up our stop price on America Movil to $23.