China is transforming itself from a destination for international capital to a major source of capital. According to some experts, Chinese capital accounted for as much as two-thirds of all major acquisition deals in the region, overtaking capital from foreign investments for the first time. And while direct foreign investment in China is roughly where it was a year ago, the amount of Chinese capital invested abroad has also risen sharply. In addition, the pace of foreign acquisition is strong with both state-owned enterprises (SOEs) and private companies.

CNinsure (CISG), an independent Chinese insurance intermediary company, reported a great fourth quarter and robust results for full-year 2009 on March 2. Net revenues came in at $169.2 million, a 36.8% increase from the previous year and exceeding the company’s previous guidance of 36% growth; income from operations was $47.8 million, a gain of 55.5% from 2008; net income attributable to shareholders was $44.1 million, a 56.9% gain from 2008; and basic and diluted net income per share was 96.6 cents and 95 cents — increases of roughly 55% from the previous year.  

The excellent results demonstrate that CISG’s management team is able to execute their three-part strategy: Deliver consistent results by developing new channels for distribution, such as telemarketing, online sales, and brokerage businesses; introduce more sophisticated products for big ticket sales; and launch bundled-sales campaigns.  

CISG’s competitive advantage and strong network enabled the company to further strengthen its partnership with insurers during the quarter, making significant progress in the business clientele sector.  

I expect CISG to continue to offer new products and services — including more customized insurance policies, as well as consumer finance and wealth management products. The company is also implementing a fee-based revenue model, which has already been successfully used by several of its property & casualty (P&C) insurance agencies in 2009.  

With these moves, I believe that the company will continue to expand its market share in the fast-growing insurance and financial services industry in China. And this will continue to boost the shares.

Already, CISG has rocketed more than 50% off its February lows, boosted higher by a great fourth-quarter and full-year 2009 earnings report. As a result, shares are trading above our $23.50 Buy Limit, so I recommend that you continue to buy CISG on dips under $23.50.

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