If you’re like me, some investments just feel different.
There are the boring, conservative investments – which can be great, of course. They’re often your work-horses, adding stability to your portfolio and paving the way for long-term gains. But they’re slow-growers, so they don’t offer much excitement.
Then you have your high-flyers. These can be loads of fun – a bit like going to Vegas. But because they’re so volatile, the knife often cuts both ways. Up 30% one month, down 50% the next … Your initial excitement can quickly turn to regret.
But then, you have a sweet-spot investment. For me, it’s often something that’s rooted in a big idea, underpinned by numbers, facts, or verifiable data – not just hope or fantasy (like the high-flyers). This type of investment feels different, because it offers the excitement of a speculation with eye-popping growth projections, yet its story and fundamentals are grounded, similar to a conservative, work-horse stock.
More times than not, this special type of investment exists because of one reason …
It’s rooted in a massive trend or a theme.
We’ve talked about thematic investing in recent Digests . The idea is basically to identify a large-scale trend – could be societal, technological, demographic, you name it – and then let that tectonic shift do the hard work of making money for you. All you have to do is invest wisely, then be patient as the trend plays out.
Some of the massive trends our analysts have been using to generate investment gains for our readers include legalized marijuana, 5G telecommunications, and next-generation batteries, among others.
We’re adding another massive trend to the list, and this one feels special. In short, a tremendous amount of wealth is going to be made over the coming years from this one theme, and today, we’re putting it on your radar if it’s not already there.
So, in this Digest , I’m going to piggyback on work done by our own Matt McCall, editor of Investment Opportunities . Matt just returned from a trip to China, and what he described about China’s growth and wealth potential in his latest issue is mind-boggling.
Forget the trade war, tariffs, and the new tech cold war – today, let’s dive into why China’s massive growth can be your exponential gain.
***Why China’s boom days aren’t over
Matt begins his issue describing his awe at seeing what China is like today. Rather than the backwoods, third-world country many of us might envision, China is different. Matt’s repeated thought when traveling and seeing China’s cities was “how in the heck did they build this?” He then addresses the misconception that China’s growth story is over.
After spending more than a week there, I am convinced more than ever that there will be another leg higher in the ongoing economic boom. I am also convinced that we can make a lot of money in the right companies … This is not an opportunity you want to miss …
Skeptics point to China’s slower growth. But let’s keep that in perspective. There were years in the 1990s and early in this century when the economy grew more than 14% annually. Of course it’s going to slow down some. Still, growth remains robust – above 6% each year, which most nations drool over.
When you’re talking about a nation with 1.4 billion people – more than 4X the number of people in the United States – even “just” 6% growth means a lot of money is changing hands among a lot of people, businesses, and the government.
***Why you want Beijing in your corner
Matt then pivots, bringing the Chinese government into the picture. You may have a slightly negative impression of the Chinese government due to its communist orientation and reputation for meddling. But Matt tells us that when it comes to investing, Beijing’s influence can actually be a huge benefit. That’s because when the Chinese government wants an industry or sector to grow, they make it happen.
Ten years ago, China’s government was determined to grow the nation’s technology industry. That helped lead to the eye-popping 67,000% gain from Tencent Holdings. Then there was China’s legendary infrastructure boom, which helped PetroChina grows 17 times over. Or take Anhui Conch Cement, which returned 26,000% for its investors.
***The opportunity at hand
Matt then lays out his rationale behind “why China?” and “why now?”:
The reason we need to talk about this now is that Chinese stocks are trading at historically low valuations due to the trade dispute with the U.S. Thus, we have one of the best buying opportunities in the last few years for the second largest economy in the world. The moment the trade debacle with China is settled, stocks in the country will explode higher, and I expect it will be the beginning of another multiyear bull market.
Matt goes on to tell us that the potential of a trade war combined with fears of a slowing Chinese economy has led to Chinese stocks crashing. Everything from large-cap technology stocks to manufacturing companies have been affected by fears of something big around the corner.
But what actually is around the corner, according to Matt?
The start of the next leg higher of one of the greatest economic stories of the century.
***Matt points toward five different sub-themes of the Chinese growth story
Theme #1: Urbanization – the movement of people from rural to urban areas to cities has been one of the biggest trends in Asia over the last several decades. In 1978, 17.9% of the Chinese population lived cities. By the end of 2017, that number had surged to 58.5%.
Look at these photos of Shanghai a little over thirty years ago versus today.
This trend is far from over …
According to Global Demographics, China’s urban population will increase from 834 million today to 989 million by 2028. That’s almost one billion people in China’s cities, which would represent 70% of the total population.
Let’s put those percentages into actual numbers. In less than a decade, 155 million people are expected to move into Chinese cities. That’s equivalent to the combined populations of the United Kingdom, Italy, and Australia.
Theme #2: Infrastructure – Matt tells us China is going to need bigger and better infrastructure to accommodate all of those migrating citizens.
By the end of 2020 – yes, less than two years from now – China plans to add 30,000 kilometers of new high-speed railway track to connect rural areas with the new sprawling cities. That’s over 18,500 miles, enough for six different tracks to cross the United States.
In the 15 years between 2016 and 2030, China plans to spend $14.2 trillion on infrastructure.
One of the simplest and most effective rules of investing is to follow the money. You can believe we’ll be following a $14.2 trillion transfer of wealth just as you can be sure huge winners will be created.
Theme #3: Real Estate – all of these people moving to the cities will need a place to live. The simple laws of supply and demand tell us that real estate prices will be much higher in the coming decade.
But what Matt wrote next in his issue absolutely blows my mind …
The combination of urbanization alongside normal growth points to the need for 115 billion square feet of housing in the next 15 years. For context, that’s approximately 37 Londons or 29 New York Cities!
Matt has his eye on a few large Chinese real estate developers that he expects will be the beneficiaries of this massive growth.
Theme #4: Demographics & Healthcare – China’s population is aging … and fast.
Matt tells us that today, the median age in China is 37. By 2040, that number will have increased to 47. Monaco is the only other country in the world with a higher median age.
One of the most obvious ways to play this will be through healthcare investments as the Chinese population experiences more age-related health issues.
The unfortunate rise in health issues will result in a massive healthcare spending boost by both the government and private sector. Healthcare spending is predicted to account for 17.1% of China’s GDP by 2028, up from 11.3% last year.
Based on the sheer number of Chinese who will require medical attention in the coming decades, there is huge upside for healthcare-related companies.
Theme #5: Transportation 2.0 – electric and autonomous vehicles will lead the $7 trillion disruption of the traditional vehicle industry.
Matt tells us that China is already the leader in electric vehicle (EV) sales and production. In 2018, 876,000 EVs were sold, accounting for 60% of global sales and production. The U.S. is well behind at just 361,000 units, or a little over 40% of China’s sales.
According to Bloomberg research, the number of EVs on the road is set to explode in the next 20 years, and China is clearly well positioned as a first mover within the industry.
The trend is unstoppable, and it is in these early innings that we can make the big money. Remember, our goal in Investment Opportunities is to own the leaders in long-term trends with the potential to create 10-baggers and more. That’s the kind of upside we’re talking about here.
***Don’t be thrown off by the trade war – China is a multi-year investment with huge tailwinds
While there are various Chinese ETFs an investor could look toward to try to capitalize on this growth story, we’re obviously fans of Matt given his investment experience and boots-on-the-ground research in China. Few analysts have his track record of winners. Furthermore, when investing in China, you need to be careful since questionable accounting practices and misinformation is more prevalent.
Over the coming weeks, I’ll lobby Matt to see if we can leak some of his specific Chinese picks here in the Digest . In the meantime, if you’d like his help in adding the best Chinese stocks to your portfolio, you can learn more by clicking here .
As we finish up this issue, I’d like to give Matt our parting words:
You have probably read about China’s economic boom the last two decades and the massive money that has been made in various industries. Gains so big that you think a decimal point is out of place. Profits that changed lives forever.
After spending more than a week there, I am convinced more than ever that there will be another leg higher in the ongoing economic boom. I am also convinced that we can make a lot of money in the right companies.
I know a lot of investors who missed out on the first round of big gains but are still hesitant to put their money into China-related stocks. This is not an opportunity you want to miss.
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