Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Rules for Making Stock Market Profits in the Next Decade

Stock-Markets / Investing 2010 Dec 16, 2009 - 09:14 AM GMT

By: Tony_Sagami

Stock-Markets

Best Financial Markets Analysis ArticleYour town probably has a Chamber of Commerce. Even my little town of Bigfork, Montana (population 6,000) has a Chamber of Commerce.

The Chamber of Commerce isn’t restricted to only the U.S. either. One of the largest chambers is located in Shanghai, China.


The American Chamber of Commerce in Shanghai was founded in 1915, was the third American Chamber established outside the United States, and is the largest Chamber in Asia. 

The Shanghai Chamber’s membership is virtually a who’s who of American business that includes companies from Amway to Intel to McDonalds to Xerox. So when the Shanghai Chamber surveys its members, you can bet the results tell an accurate tale of business conditions in China.

The American Chamber of Commerce in Shanghai released its 2009 China Business Report last week, and it shows that business is booming in China.

arrow Two Rules for Making Stock Market Profits in the Next Decade  More than 90% of the businesses surveyed reported they were "optimistic" or "slightly optimistic" about the five-year outlook going forward. That is an improvement over the 81% in 2008.

arrow Two Rules for Making Stock Market Profits in the Next Decade  82% expect Chinese revenues to increase in 2010 from this year.

arrow Two Rules for Making Stock Market Profits in the Next Decade  40% said the profit margins of their China operations in 2009 were better than their global averages.

arrow Two Rules for Making Stock Market Profits in the Next Decade  74% ranked China as one of their top-three expansion priorities, and 64% plan to increase their investments in China in 2010. That’s an amazing statistic because 58% of the companies already increased their investment in China this year.

arrow Two Rules for Making Stock Market Profits in the Next Decade  Only 5% were planning to scale back their operations in China.

“Many American companies are finding that their performance in China has outshone those in other markets. AmCham Shanghai has conducted this survey every year since 1999, and optimism among American companies in China has never been higher," said Norwell Coquillard, the American Chamber of Commerce of Shanghai chairman.

Every Portfolio Needs a China Strategy

Yum! Brands, which operates KFC and Pizza Hut, has an effective and profitable China strategy.
Yum! Brands, which operates KFC and Pizza Hut, has an effective and profitable China strategy.

What’s this mean to you as an investor? It means that you need to review every stock in your portfolio, yes even American companies, for a China strategy.

The U.S. economy is still sick and isn’t going to get better anytime soon with our runaway government spending and reckless deficits. American companies looking to grow their business better figure out a way to sell their products in China.

At the same time, American companies need to keep looking over their shoulders to make sure Chinese companies aren’t going to steal their business with lower (cheap labor) production costs and lower prices.

Let me give you some examples:

China Success Example: Yum! Brands, the operator of Pizza Hut and KFC, gets more than 60% of its revenues from outside of North America and is doing big business with more than 4,000 KFCs and Pizza Huts in China. Yum! Brands has an effective and profitable China strategy.

Kentucky Fried Chicken — China Style

When you travel the back roads of China like I do, lunch time can turn into a game of gastronomic Russian roulette. I’ve been offered grilled scorpions on a stick, dog hot pot, monkey brains, and lots of other things I couldn’t begin to identify.

Fortunately, the conspicuous red “KFC” and Colonel Sanders logo can easily be found on the facades of shopping centers and office buildings. When approaching such buildings, it is often easy to notice that both floors of the restaurant are packed with customers. Of all the KFCs I’ve visited in China, no matter what time of day or night, business was overflowing.

The accessibility of the KFC restaurants is unmatched by any other fast-food chain in China. In nearly every place where there’s a crowd, there’s a KFC. They can be spotted just off of highways, in shopping areas, and prime tourist locations.

Yum! Brands has done an excellent job tailoring this American chain to the Chinese market. The menu is different from the United States, featuring smaller-sized meals and new entrees with desserts and ingredients well liked by the locals. Better yet, according to Peking University marketing Professor Jianfeng Wu, the Chinese consider KFC to be somewhat of an upscale restaurant (in contrast to the “fast food” cliché it has in America).

The menus for Pizza Hut are substantially different from that of the states, featuring bizarre ingredients such as seafood and corn (yes, corn!). The atmosphere inside is more elegant, as if it were an expensive steakhouse. The good news is that the Chinese seem to like it, as each Pizza Hut I’ve seen was almost as busy as the adjacent KFC.

On the flip side, here are some strategies that haven’t worked out:

China Failure Example: McDonalds just reported a drop in same-store sales by 1% in Asia. McDonalds beat Yum! Brands to the punch and was one of the first American companies to make a big push in China. What McDonalds didn’t realize is that Chinese greatly prefer pork and seafood to beef, and that slapping a pineapple ring and teriyaki sauce on a hamburger does not make it Asian enough for most Chinese tastes.

China Failure Example: North Carolina used to dominate the furniture industry, but low-cost competition from China has crushed the profits of U.S. furniture makers and has stolen 40% of the market share from American companies.

Clearly, if the Chinese decide they want to become a meaningful competitor in your industry … you’re in a big heap of trouble.

Two Rules for Making Stock Market Profits in the Next Decade

Here are the two most important investment rules for making stock market profits in the next decade: (1) get ‘long’ whatever the Chinese are buying and (2) get the heck out of any U.S. company that is fighting what will be a losing battle against cheap Chinese competition.

What are the Chinese buying? Oil, copper, natural gas, coal, gold, steel, cement, English lessons, American pizza, hotel rooms, pollution-control equipment, homes, designer clothes, gambling junkets, solar power panels, and cell phones to name a few.

All those companies spending billions of dollars to establish a business beachhead in China are there for one reason: TO MAKE MONEY. And according to the members of the American Chamber of Commerce in Shanghai, the opportunities have never been better.

Best wishes,

Tony

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in