by Jim Woods | December 20, 2013 1:06 pm
China is a demographic dream, with millions of citizens steadily entering middle-class status each year. That dream is one that’s not lost on some of the biggest companies in the world.
And, after the past couple of years of growing pains in the Chinese economy, things are stabilizing. Gross domestic product growth came in at 7.8% for the third quarter, a nice uptick from the 7.5% GDP growth in Q2.
Then there’s the proposed makeover of the Chinese economy by new leadership, which includes a loosening of the country’s one-child policy, a new system for insuring bank deposits, and an easing of restrictions on offshore securities investments and mergers and acquisitions.
The confluence of favorable demographics, positive directional GDP growth and business-friendly reforms has in part prompted many big-name U.S. companies to announce China expansion plans. Companies from Walmart (WMT) to Amazon (AMZN) to Apple (AAPL) are willing to bet on the Chinese economy, despite fears of a possible liquidity crunch.
Take a look at my favorite five companies that are planning to ride the fire-breathing dragon in 2014 and beyond.
When the biggest retailer in the world talks; people listen— especially when that retailer speaks Chinese.
Earlier this year Walmart (WMT) announced plans to open two additional Sam’s Club outlet stores in China in 2014. Most recently, the company’s head China guy, Greg Foran, said he hopes to increase that rate each year until there are 10 new Sam’s Club stores per year in the next six or so years.
Up until recently, WMT focused on expanding its namesake brand stores in China, but the shift toward Sam’s Club stores is widely seen as a move to stay ahead of growing competition from local discount retailers.
Will the move be successful and boost WMT stock? While that remains to be seen, I wouldn’t bet against the will of the mighty Walmart.
The biggest personal technology company in the world, Apple (AAPL), wants China to take bigger bites of its fruit, as evidenced by talks of a deal with China Mobile Limited (CHL).
Although AAPL and CHL haven’t worked out all of the details, the announcement earlier this month confirmed what most Apple watchers were anticipating. And that’s the inking of a deal that would give the company a big boost in what is by far the world’s largest mobile market.
Given that the Apple iPhone will likely soon be available to China Mobile’s 740 million subscribers, the deal is bound to be a blockbuster for AAPL stock. And, to put that subscriber number in context, all one has to do is realize that China Mobile has about twice the number of subscribers than the entire U.S. population.
If Apple can grab even a sliver of China Mobile users, that’s hundreds of millions of iPhones sold, and good news for AAPL stock investors.
There’s no stock that’s been hotter than Tesla Motors (TSLA) this year. Yes, there is a running joke about how “hot” Tesla batteries have been given the few fires those batteries have caused, but the emergence of Elon Musk’s brainchild and the explosion of TSLA stock is nothing to laugh at.
The fact is that TSLA is changing the way the world looks at the automobile, and I have zero doubt that in decades to come electricity will likely dominate the propulsion systems in most cars. More immediately, however, is Tesla’s plan to conquer the China market — one that’s replete with newly minted millionaires eager to spend big bucks on the coolest tech toys.
TSLA just started launched its China website Tousule.cn, and it currently is taking pre-orders with a reservation fee of RMB 250,000, or about USD $41,000 USD for its Tesla Model S sedan. The launch of the website follows the opening of a Tesla Motors showroom in Beijing last month.
TSLA will likely start delivering the Model S in the first quarter of 2014 at an estimated cost of between $146,000 and $200,000 — much higher than the $80,000 or so you’d have to pay here in the U.S.
Online business networking site LinkedIn (LNKD) has taken the U.S. by storm, hooking up professionals and companies from around the country. Now, LNKD plans to hookup China as well.
According to BMO Capital Markets analysts Daniel Salmon and Jeffrey Silber, LinkedIn is preparing to formally launch in China in 2014. The analysts put out their expectations via a note to clients in early December that floated the idea that LNKD has hired a public relations firm to help with the effort.
The analysts upgraded their rating on LNKD stock to “Outperform” from “Market Perform” on the speculation, and that caused a big bump in LinkedIn stock.
Given that the stock is up more than 92% year to date, a China boost could make LNKD stock another big winner in 2014.
I am a huge bull when it comes to online retailer Amazon (AMZN). AMZN is what I call a “stock dominator,” and that means their very existence has changed the world for good. It also means Amazon stock is one of those I think just about every investor must own.
Amazon, led by genius CEO Jeff Bezos, has always wanted to expand in China. And this week, AMZN did just that, signing a new agreement to expand its cloud empire into China. The agreement is with the Beijing and Ningxia governments to offer Amazon Web Services (online services for building and running large software applications) from data centers in Western China.
Unlike other areas of the world, Amazon does not plan to operate these computing centers on its own. Instead, AMZN plans to offer its new services through local Chinese data center operators and Internet service providers such as ChinaNetCenter and SINNET.
The move isn’t just another potential driver for AMZN stock, either. Instead, Amazon represents yet another big expansion into the China market by high-profile companies, and more fuel for a trend that I suspect will continue on for years to come.
Disclosure: At the time of this writing, Jim Woods was long AAPL, AMZN, TSLA.
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