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If I ask you to name some of the most famous consumer brand names in the world, what would you say? Apple? Budweiser? Coke? Dell? Microsoft? Nike? I could go on and on.
My point is that companies that can establish trusted, enduring, brands that make an emotional connection with consumers can make fortunes for decades and decades. That’s because loyal, repeat customers mean steady, consistent profits.
It can also mean steady, consistent profits for investors, too, because investing in companies with top-tier consumer brands has proven to be a very profitable long-term investment strategy.
Example: A study from research group WeSeed found that the stocks of America’s top 100 brands — as defined by Business Week — outperformed the S&P 500 by 59% over the last five years.
From 1999 to 2008, the S&P 500 lost 28% of its value, but the Business Week top 100 brands rose by 31%. Clearly, the name-brand familiarity also translates into big investment profits.
Imagine how rich you’d be if you had invested in those above companies 20 or 30 years ago? If only you had a time machine, you’d have gone back and bought the stocks of those top consumer brands and smiled all the way to the bank.
Well, there’s no such thing as a time machine, but there is a way to essentially turn back the investment clock by investing in the top brands of emerging markets that are in the 1960s of consumer branding.
I’m talking about China. There was no such thing as designer labels during the Cultural Revolution and Great Leap Forward. After the Communist Party takeover in 1949, every hint of capitalism and wealth was wiped out.
“To get rich is glorious” and keeping up with the Chens
When Deng Xiaoping uttered his famous capitalistic phrase — “to get rich is glorious” — in 1978, he ushered in a new period of economic development and prosperity.
The switch from a planned economy to a more market-oriented economy has grown the Chinese economy by almost 10% per year, lifted 170 million Chinese out of poverty, and increased the amount of savings in Chinese banks by 220-fold. Never before in history has any country made such amazing economic progress in a single generation.
Under Mao, most Chinese grew up poor, uneducated, and deprived of all but the basic necessities of life. Thanks to Deng’s wildly successful economic reforms, tens of millions of Chinese went from nothing to everything and their newfound riches have them spending so lavishly that the Chuppies or Chinese yuppies make the American yuppies look like skinflints.
Just like us, the Chinese have their favorite consumer brands and the latest study from CLSA Asia shows the top consumer brands in China. To me, this list is a roadmap for investment home runs.
Top Consumer Brands in China |
||
Company |
Ticker/Market |
Sector |
1. China Mobile |
CHL:NYSE |
Telecom |
2. China Life |
LFC:NYSE |
Financial |
3. Baidu.com |
BIDU:Nasdaq |
Internet |
4. China Merchants Bank |
3968:Hong Kong |
Financial |
5. Li Ning |
2331:Hong Kong |
Sportswear |
6. Sina.com |
SINA:Nasdaq |
Internet |
7. ICBC |
1398:Hong Kong |
Financial |
8. China Construction Bank |
0939:Hong Kong |
Financial |
9. Ctrip International |
CTRP:Nasdaq |
Travel & Leisure |
10. Tencent |
0700:Hong Kong |
Internet |
11. Tingyi |
0322:Hong Kong |
Food & Beverage |
12. Quingdao Haier |
N/A for U.S. |
Consumer Electronics |
13. Shanghai Metersbonwe |
N/A for U.S. |
Apparel |
14. Gree Electric Appliances |
N/A for U.S. |
Consumer Electronics |
15. Anta Sports |
2020:Hong Kong |
Sportswear |
16. Youngor Group |
N/A for U.S. |
Apparel |
17. Yantai Changyu |
N/A for U.S. |
Food & Beverage |
18. Fujian Septwolves |
N/A for U.S. |
Apparel |
19. China Resources Enterprise |
0291:Hong Kong |
Food & Beverage |
20. China Vanke |
N/A for U.S. |
Real Estate |
21. Tsingtao Brewery |
0168:Hong Kong |
Food & Beverage |
22. Lenovo |
0992:Hong Kong |
Consumer Electronics |
23. Wumart Stores |
8277:Hong Kong |
Retail |
24. China Dongxiang |
3818:Hong Kong |
Sportswear |
25. Parkson Retail |
3368:Hong Kong |
Retail |
26. New World Department Stores |
0825:Hong Kong |
Retail |
27. Beijing Wangfujing |
N/A for U.S. |
Retail |
28. Dongfeng Motors |
0489:Hong Kong |
Auto |
29. Great Wall Motor Company |
2333:Hong Kong |
Auto |
30. Faw Car Company |
N/A for U.S. |
Auto |
Source: CLSA Asia-Pacific Markets |
||
These are the Allstates, Budweisers, Dells, Googles, Nikes, and Wal-Marts of China. For example:
China Mobile is the largest cell phone company in China, but get this: China Mobile has MORE customers than the U.S. has people!
You may have enjoyed a Tsingtao beer at a Chinese restaurant, but it dominates the national Chinese beer market so thoroughly that it is like Budweiser, Coors, and Miller all rolled into one.
Remember the dramatic lighting of the torch at the 2008 Beijing Olympics? The man circling the rim of the Birds Nest stadium was Li Ning who is considered the Michael Jordan, Mickey Mantle, and Jesse Owens of China all rolled into one. His athletic apparel company, Li Ning, is the Nike of China.
I’m not suggesting you rush out and buy any of those companies. As always, you have to carefully pick your entry points. But this list has several stocks that I believe could easily grow by 100% in the next 12-18 months and by more than 1,000% in five to eight years.
Yeah … ONE THOUSAND PERCENT! That’s what Peter Lynch called “ten-baggers” or stocks that increased in value by 10 times your investment.
The reason is that the Chinese consumer branding process is at the same point the U.S. was in the 1950’s and 1960’s. You have the opportunity to roll back the investment clock and cherry pick the very best, most recognized, most respected consumer stocks in China at close to the ground floor.
To get rich is glorious and the above list is a roadmap of Chinese companies that will help you do so.
Regards,
Tony Sagami
About Uncommon Wisdom
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