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It's Back to the Future with These China
Brands |
by
Tony Sagami
If
I ask you to name some of the most famous consumer brand names in the
world, what would you say? Apple? Budweiser? Coke? Dell? Microsoft?
Nike? I could go on and on.
My
point is that companies that can establish trusted, enduring, brands
that make an emotional connection with consumers can make fortunes for
decades and decades. That's because loyal, repeat customers mean
steady, consistent profits.
It
can also mean steady, consistent profits for investors, too, because
investing in companies with top-tier consumer brands has proven to be
a very profitable long-term investment strategy.
Example: A study from research group WeSeed found that the stocks of
America's top 100 brands — as defined by Business Week —
outperformed the S&P 500 by 59% over the last five years.
From 1999 to 2008, the S&P 500 lost 28% of its value, but the
Business Week top 100 brands rose by 31%. Clearly, the name-brand
familiarity also translates into big investment profits.
Imagine how rich you'd be if you had invested in those above companies
20 or 30 years ago? If only you had a time machine, you'd have gone
back and bought the stocks of those top consumer brands and smiled all
the way to the bank.
Well, there's no such thing as a time machine, but there is a way to
essentially turn back the investment clock by investing in the top
brands of emerging markets that are in the 1960s of consumer branding.
I'm talking about China. There was no such thing as designer labels
during the Cultural Revolution and Great Leap Forward. After the
Communist Party takeover in 1949, every hint of capitalism and wealth
was wiped out.
"To get rich is glorious" and keeping up with the Chens
When Deng Xiaoping uttered his famous capitalistic phrase — "to get
rich is glorious" — in 1978, he ushered in a new period of economic
development and prosperity.
The switch from a planned economy to a more market-oriented economy
has grown the Chinese economy by almost 10% per year, lifted 170
million Chinese out of poverty, and increased the amount of savings in
Chinese banks by 220-fold. Never before in history has any country
made such amazing economic progress in a single generation.
Under Mao, most Chinese grew up poor, uneducated, and deprived of all
but the basic necessities of life. Thanks to Deng's wildly successful
economic reforms, tens of millions of Chinese went from nothing to
everything and their newfound riches have them spending so lavishly
that the Chuppies or Chinese yuppies make the American yuppies look
like skinflints.
Just like us, the Chinese have their favorite consumer brands and the
latest study from CLSA Asia shows the top consumer brands in China. To
me, this list is a roadmap for investment home runs.
These are the Allstates, Budweisers, Dells, Googles, Nikes, and Wal-Marts
of China. For example:
China Mobile is the largest cell phone company in China, but get this:
China Mobile has MORE customers than the U.S. has people!
You may have enjoyed a Tsingtao beer at a Chinese restaurant, but it
dominates the national Chinese beer market so thoroughly that it is
like Budweiser, Coors, and Miller all rolled into one.
Remember the dramatic lighting of the torch at the 2008 Beijing
Olympics? The man circling the rim of the Birds Nest stadium was Li
Ning who is considered the Michael Jordan, Mickey Mantle, and Jesse
Owens of China all rolled into one. His athletic apparel company, Li
Ning, is the Nike of China.
I'm not suggesting you rush out and buy any of those companies. As
always, you have to carefully pick your entry points. But this list
has several stocks that I believe could easily grow by 100% in the
next 12-18 months and by more than 1,000% in five to eight years.
Yeah ... ONE THOUSAND PERCENT! That's what Peter Lynch called
"ten-baggers" or stocks that increased in value by 10 times your
investment.
The reason is that the Chinese consumer branding process is at the
same point the U.S. was in the 1950's and 1960's. You have the
opportunity to roll back the investment clock and cherry pick the very
best, most recognized, most respected consumer stocks in China at
close to the ground floor.
To
get rich is glorious and the above list is a roadmap of Chinese
companies that will help you do so.
Regards,
Tony Sagami
