I recently heard someone compare investing in China to “the Wild West.” This is actually a very accurate description. China is the new frontier of investing, and it’s a dangerous place for people who don’t know the financial landscape. But for those of us who know the financial terrain, the culture, and have spent years investing in the region, China is a gold rush for investors.
A major driving force behind the Wild West analogy is the booming IPO market. I get asked about these types of investments all the time. There have been quite a few of them over the last two years, and there’s likely to be many more to come.
One of the questions that I get most often from investors is “How can we tell if a newly offered China stock is worth buying?”
Evaluating an IPO is probably more of an art than an exact science. Because I’ve been doing it for so long, I’ve developed a rigorous process of evaluating these new listings. I evaluate price momentum, market psychology and the company fundamentals behind every new publicly-traded China stock. I also have my boots-on-the-ground team investigate firsthand what the company is up to in China. My team will visit the company whenever possible, they’ll talk to employees and they’ll survey customers. If all of the criteria are met, I tell my subscribers to buy.
And you just can’t find these opportunities anywhere else. I know because my analysts go where Westerners can’t. And we find the whole truth. It means big profits—fast—for China Strategy subscribers. Interested in learning more about these winning IPOs delivering large and rapid gains? Then click here now to get started.
Recently, a company didn’t pass my IPO screening test. In early May, China’s version of the Home Shopping Network, a company called Acorn International (NYSE: ATV), went public on the NYSE. I won’t lie; initially I was very interested in this company. On the surface, ATV seemed like a good bet to me: It was a play on China’s booming consumer market, its business was growing rapidly, and even though the stock was a bit pricey, the numbers led me to believe that there could be a viable investment opportunity here. Naturally, my next move was to call our research team in China to ask them what they thought about the company and what consumers were saying.
Through my contacts, I learned that ATV was developing a bad reputation among local shoppers for selling shoddy products in China. That was enough for me to not recommend the stock. Then in July during my visit to China, I went ahead and checked out the network’s programming for myself. I was not impressed by the snake-oil salesmanship I saw. Because of my firsthand experience, I know that Acorn is a company that has no business being in our China Strategy portfolio.
My decision to avoid the company was confirmed by the stock’s poor performance. Since its May IPO, Acorn’s shares have sold off, failing to reach prices last seen on the first day of trading. This is the advantage of having boots-on-the-ground intelligence and getting information directly from China.
Two IPOs to Buy Now
Although Acorn didn’t make it onto my list, I have found and profited from many other new public offerings. One of the first IPOs I recommended to my China Strategy subscribers was a medical devices company. The company started trading on the New York Stock Exchange about a year ago—on September 26, 2006, to be exact—and not a lot of investors know about it yet. I waited until October 19 to jump on the stock, and now, one year later, we’re up 157%!
My next IPO was an education company that passed all of my filters and went public on the New York Stock Exchange on September 7, 2006, which is significant. Normally, Labor Day is a quiet time on Wall Street, as traders and investment bankers return from their summer vacations and begin gearing up for the fall. As a result, new IPOs don’t typically happen until two weeks after the Labor Day holiday. But this stock turned tradition on its head and had a successful debut.
The company’s initial offering was priced at $15, which was well above the $11–$13 range that analysts had predicted. After the market closed on its first day of trading, shares had soared more than 47%. Once again, I waited about a month to pull the trigger on this stock and purchased it on October 31, 2006. Today we’re sitting on gains of 150%.
If you want to be successful at investing in Chinese companies, you must have a strategy for buying China IPOs. The stakes are high—the losses are great for those investors who don’t know which public offerings to buy. But the potential profits for smart investors are even greater. Join China Strategy today and be the first to know which companies have the best chance of becoming true wealth-builders.
Don’t miss out on the profits to be made in this booming IPO market. Join China Strategy and profit handsomely from these IPOs—our average IPO gains are an amazing 186%! It’s not too late to get in on the action—click here to join me today.
