Potential Rewards Are High
Thursday, April 6th, 2006
By Mitchell Clark, B.Comm. for Profit Confidential
A company I really admire is Focus Media Holdings (NASDAQ/FMCN). I’ve talked about this company before and the more I look at this business, the more I like it.
Focus Media is a Chinese company whose shares trade on the NASDAQ in the form of American depository shares (ADS). Many still refer to these kind of shares as American depository receipts.
An ADS is a stock that trades on an American exchange, but the company also has a significant amount of shares trading on a foreign stock exchange. An ADS is a great way for domestic investors to own shares in a foreign corporation, without having to deal with the bureaucracy and tax implications of directly investing on a foreign stock exchange in another currency.
Focus Media is one of China’s largest advertising companies. The company’s business plan is to provide “out-of-home” advertising, by installing flat-panel displays in high-traffic areas in office buildings, retail stores, residential buildings, shopping malls, golf clubs, and airports. The company’s huge network of flat-panel screens allows advertisers to target specific consumer segments with focused product placement.
Targeting white-collar workers, at the end of 2005, the company had approximately 50,000 LCDs reaching millions of individuals in some 58 cities in China.
Recently, the company just branched out to wireless advertising by acquiring Dotad Media Holdings Limited, which sells mobile- phone advertising. Headquartered in Beijing, Dotad owns and operates the largest WAP-based (Wireless Access Protocol based) advertisement delivery platform in China through China Mobile and China Unicom’s mobile networks. All of the top 100 wireless telecom service providers in China are customers of Dotad, which has a database of some 70 million users–that’s 70 million!
With the economies of scale China offers due to its population size and its thirst for economic advancement, I think you just have to consider some China-based investments in a risk-capital portfolio. Investment risk is high. Price volatility is high. But then again, so are the potential rewards.
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Tags: china, chinese economy, stock market
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.



