"Our investment philosophy looks for companies with strong market positions and potential, accompanied by growth in fundamentals and supportive charts," explains emerging markets expert Paul Goodwin.

In The Cabot China & Emerging Markets Report, he adds, "When all three of these stars line up, -- such as with our latest featured stock, AsiaInfo Holdings (NASDAQ: ASIA), the odds are in our favor." 

"AsiaInfo Holdings certainly has a good story. The Chinese telecom system has undergone a radical makeover in the past decade, switching over from a landline system to a wireless cellular system at a very fast clip.

"While there is still a huge wire-line system, the rapid build-out of cellular towers has transformed the Chinese phone system.

"Last year, the government took the two biggest wireless firms and the two biggest wire-line firms in China and mashed them together to form three companies—China Mobile, China Unicom and China Telecom—each of which has both wireless and landline components.

"Fortunately for AsiaInfo, it counts all three among its clients. And since the big shakeup, these companies are relying on AsiaInfo to support their moves into unfamiliar territories that they had not served before.

"AsiaInfo’s software products set up the infrastructure that networks need, handling billing and customer relationship management, while providing its client companies with analytical services to figure out demographic and usage trends that can boost the marketing of new services.

"Earlier this year, the government fi nally awarded the 3G licenses that will allow a whole new class of wireless services. This makes AsiaInfo’s expertise in messaging, file sharing, short messaging and e-commerce even more important.

"The combination of the shakeup in the telecom industry and the advent of 3G service has been a huge boost for AsiaInfo’s financial results.

"Earnings growth in the last three quarters has accelerated from 22% (Q4 ’08) to 45% (Q1 ’09) to 92% (Q2 ’09). That has come on revenue growth of 32%, 46% and 39%, respectively.

"The after-tax profit margin in Q2 came in at 19.4%, the highest since the end of 2007. The company has no debt to speak of and plows nearly 13% of earnings back into R&D.

"The chart for ASIA isn’t a problem, but it is a puzzle. The long-term trend has been up since the beginning of 2006, but progress has been by fits and starts. After a great rally in May, the stock took a dive in June that dropped it from 22 to 15 in just 10 trading days.

"But ASIA wasn’t done. After a good July that lifted the stock back above 20, it continued to oscillate, executing four up/down cycles in a tightening pattern. The stock eventually tightened up just under 21, then used that base as a launching pad; the stock recently broke out to its highest level since 2002. 

"AsiaInfo Holdings will be reporting earnings on October 28 (after the close), which has the potential to be a huge inflection point.

"With just 83 institutional investors onboard, the potential for increasing sponsorship is enormous. But the earnings report is crucial. Tecnically, we would prefer to see it correct to 22, but you can buy a little ASIA right here."