 |
As I’ve told you before, I believe the #1 rule for making money in the next decade is to get long whatever the Chinese are buying.
After all, China will need to consume an unprecedented amount of natural resources to fuel its red-hot economy and feed its 1.4 billion people. And in a moment, I’m going to give you four specific areas to target, and the company in each area that looks most like a takeover candidate.
But first, I want to tell you about …
Four Recent Chinese Deals
That Prove My Point!
In just the last week, we witnessed a flurry of deals that prove just how hungry China is for natural resources.
Deal #1: The State Administration of Foreign Exchange (SAFE), which manages China’s $1.4 trillion foreign exchange reserves, bought a 1.6% stake worth $2.8 billion in French oil firm Total and 1% of British Petroleum for $2 billion.
Deal #2: Baoshan Iron and Steel is expected to buy a 9% stake in Australian miner BHP Billiton. And it’s worth noting that Aluminum Corp of China, also known as Chalco, partnered with Alcoa to buy a 9% stake in BHP rival Rio Tinto earlier this year.
 |
| Baoshan Iron and Steel is China’s flagship, state-of-the-art steel producer. |
Deal #3: Chinese Iron and Steel Group is going to increase its stake in Australian prospector Apollo Minerals to 19.9%.
Deal #4: Sinosteel of China bought a 2.4% interest in Murchison Metals and offered $954 million for the Midwest shares it does not own.
Even more telling perhaps, are the deals that did NOT happen:
First, Steelmaker Shougang’s attempt to buy 19.7% of Australian miner Mount Gibson Iron was blocked after running into strong opposition from Australian regulators.
Second, China National Petroleum Corporation (Petro China) tried to purchase a $20-billion stake in Spanish oil company Repsol but was rejected.
So there’s no doubt in my mind that China is on a buying spree. And I’m not just talking about oil, either. Fact is …
The Chinese Have a Ravenous Appetite
For Virtually ALL Commodities!
While I don’t have any inside knowledge about what companies the Chinese have in their sights, I do know what industries are strategically important to their lofty growth objectives.
| External Sponsorship |
|
Beware! Over the next 12 months, despite all the bank write-downs, market bombs and “bailout” talk … there are at least five more devastating new financial shocks in store. See how you can protect yourself and profit … learn more here: http://www.dailyreckoning.com/PPC/DRI.html |
Energy: Do you remember China Petroleum’s failed takeover attempt of Unocal in 2006? China needs energy — and lots of it — so you can expect frenzied buying activity to lock up reliable supplies of multiple sources of energy. In my book, oil, natural gas, coal, and uranium are all key players.
My #1 pick for an energy takeover: Cameco (NYSE:CCJ), the largest uranium producer in the world.
Base Metals: After fuel, the next thing China needs the most are the basic minerals and metals to build things like roads, bridges, skyscrapers, dams, ports, and power plants. That means that China will need all the aluminum, copper, iron, potash, bauxite, zinc, tin, and cement it can get its hands on.
My #1 pick for a base metals takeover: Companhia Value (NYSE:RIO), which is a diversified Brazilian mining company and the largest producer of iron ore and nickel in the world.
 |
| With 1.4 billion people to feed, China has stopped exporting rice. |
Food: Rice shortages have been plastered all over the news recently and while rice is a crucial staple of the Chinese diet, they also need pork, wheat, soybeans, poultry, edible oils, dairy, and seafood.
My #1 pick for a food takeover is Sadia S.A. (NYSE:SDA), a Brazilian food company that specializes in poultry and pork — two of China’s favorite protein sources.
Water: I can see the day when one of the most valuable commodities in the world will be water. One-third of China’s rural population — an estimated 360 million people — does not have access to safe drinking water because more than 70% of China’s rivers and lakes are polluted. Some of China’s rivers are black like soy sauce from industrial effluent and untreated sewage!
My #1 pick for a water takeover is China Water Affair, a Hong Kong-based sewage treatment and water supplier that operates in a handful of Chinese provinces.
And while there’s no “sure thing” in the financial markets, I can say with confidence that the Chinese will be very aggressive buyers in these sectors.
So, Here’s What I Suggest For Most Investors
While I think the four companies I just mentioned are attractive takeover candidates, you might also consider focusing on sector exchange traded funds (ETFs) that zero in on these key industries. Here are four ETFs that target each of the above sectors.
1.) Energy: Energy Select Sector SPDR (XLE)
2.) Base Metals: PowerShares DB Base Metals (DBB)
3.) Food: PowerShares Dynamic Food & Beverage (PBJ)
4.) Water: Claymore S&P Global Water Index (CGW)
I should also mention that the Chinese are buying lots of other things, too. They’re buying homes, cars, electronics, clothes, cell phones, English lessons, gambling vacations, and video games. For that reason, I think these areas present spectacular investment opportunities as well.
While you can’t throw a dart at Chinese stocks and be successful, there is zero doubt in my mind that China deserves a special and significant place in your portfolio.
Why? Because we’ve only seen the tip of the great Chinese stock market boom!
Heck, Jusatin Lin Yifu, the chief economist of the World Bank and head of Peking University’s China Center for Economic Research, forecasts that the Chinese economy will be 2.5 times as large as the U.S. by 2030.
“I believe China’s economic momentum is very likely to maintain a similar growth rate of the past 25 years, at about 8%,” said Yifu.
Growth of 8% a year until 2030? If Yifu is even remotely close to being right, China will be the investment of the century!
Best wishes,
Tony
About Money and Markets
For more information and archived issues, visit http://legacy.weissinc.com
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates
but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Mathias Korzan, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://legacy.weissinc.com.
From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.
|
© 2008 by Weiss Research, Inc. All rights reserved. |
15430 Endeavour Drive, Jupiter, FL 33478 |
