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Thursday November 01, 2012
Time to call up China Mobile?
by Carl Delfeld, editor Emerging Blue Chip Growth  In less than a year, China has gone from the financial media’s darling to its punching bag. Stock prices have been driven down to make China the second cheapest market in the world after Russia. We seem close, if not at, the point that John Templeton referred to as “maximum pessimism”. I can’t predict when China’s economy or stock market will turn but I do sense an opportunity. How should you approach investing in China right now? Let me lay out five principles you should follow.
So despite my strong personal distaste for state capitalism, now may be a good time to look at China Mobile when many are questioning the country’s growth prospects. For 2011, the company’s customer base grew 11.6% to reach 650 million with profits of $19.9 billion. As a defensive consumer business with a 4.1% dividend yield, CHL should hold up rather well in the toughest of markets. This stock has bucked the downtrend so far in 2012 – up 15.5%. Despite this impressive surge, the stock is trading at only a bit over ten times 2012 expected earnings. China Mobile’s trump card is a $50-billion stockpile of cash reserves ($13 per share) that is sure to beat back (or buy out) even the most intrepid of its competitors. Finally, the chance of deal with Apple to market its iPhone to its huge customer base would be a blockbuster. China’s stock market will turn at some point and usually lead economic turnarounds. Even a skeptic like me thinks it’s worth a small bet. Learn more about this financial newsletter at Carl Delfeld's Emerging Blue Chip Growth. Related articles:
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