— by Mitchell Clark, B. Comm.
With improved investor sentiment in both domestic and Chinese equities come new listings to the U.S. market and a number of very interesting new companies that are worth following.
Readers of this column will know that one of my favorite investment analysts is Jim Rogers, who is a commodities bull and a proven fortune creator in capital markets. His enthusiasm for the future rests on commodities, and Chinese and other Asian investments. In a recent interview, he reiterated his outlook for a weaker dollar and higher inflation, and the need for investors to allocate their capital to regions of the world that have their fiscal house in order. Of course, Rogers is a businessman, not a politician. He wants to make money and views everything as an investment.
One of his big areas of focus in China is basic infrastructure and, specifically, he likes to own stocks related to water treatment and energy generation.
One U.S.-listed Chinese stock that recently listed on the New York Stock Exchange is Duoyuan Global Water Inc. (DGW). The stock listed around $22.00 per share in June, and it has already appreciated some 10 points since then.
This company, based in Beijing, manufactures water treatment equipment and sells it through distributers. Items like water conditioners, cyclone filters, and water purification equipment are sold to customers at wastewater treatment plants, water works facilities, and residential communities.
In its latest quarter, the second quarter of 2009 ended June 30, Duoyuan Global Water reported that its revenues grew 32% to 31.3 million dollars. Its revenues from wastewater treatment equipment grew a substantial 48% during the quarter, while revenues from water purification equipment increased by 27%. The company finished the second quarter with profits of $9.57 million (which is excellent profitability on 31.0 million dollars in sales) and 137 million dollars of cash in the bank due to its recent IPO.
According to Duoyuan Global Water, demand for its products is increasing across all of its three main product lines. The big driver of this growth is government-mandated improvements to environment regulations, particularly as related to water treatment. China knows it has a pollution problem and it is spending billions of dollars to try to improve it. This is why the water treatment industry in that country makes for an attractive opportunity for investment. The fundamentals for this basic infrastructure are excellent and the government has money to afford it.
Over the coming quarters, we’re going to see a lot more very interesting U.S.-listed Chinese stocks come to market. I’m making a point to look into every single one of them.
Rogers has it right in his investment outlook. He’s owned Chinese stocks for years and, according to him, he hasn’t sold one of them to date. Chinese stocks are always high-risk, but so is every other stock. From my perspective as an investor, you might as well go where the growth is.