I Spy a Chinese Growth Stock

With the Olympics commencing on Friday, what better way to celebrate the start of the Beijing games than with a stock that focuses and profits on China's national pastime?

What activity am I talking about? Table tennis? Swimming? Fencing?

Nope. I am going to focus and rejoice on a pursuit that China will always wins a gold medal: the national passion for surveillance and spying on people.

The stock is China Security and Surveillance (CSR - commentary - Cramer's Take). As the name implies, the company does a lot of James Bond-type stuff without all those silly restrictions on their citizen's lives. You know, the really outrageous liberties that we tend to cherish as U.S. citizens -- stuff like personal privacy and free speech.

The Shenzhen-based company manufactures, installs and maintains security and surveillance systems throughout China. Its customers are the big boys of command and authority such as government agencies, banks, transportation and telecommunication companies.

Obviously, China employs a much different definition of "personal privacy" than we do, and therein begins the opportunity for big profit. As the world's most populous nation opens up to the world, the Chinese government worries about losing its grip on power and control. So the company benefits from the increased security-related spending by anxious government officials. Its target market is expected to grow at an incredible 35% clip.

For example, the Chinese government is funding a large initiative called the "Safe City" project. It is a $25 billion program to install a countrywide security and surveillance network, and CSR has already won several related contracts. I expect more to come.

CSR has made several smart acquisitions to become a "one-stop shop" for the spying needs of any government ministry or commercial enterprise. In late July, CSR announced the acquisition of three security companies in China: Coson Electronic, DIT Digital and Shenzhen Skyrise Technology. Through the DIT digital deal, it expands their international distribution and will now have relationships with Wal-Mart (WMT - commentary - Cramer's Take) and Home Depot (HD - commentary - Cramer's Take).

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Patrick Schultz is a research associate at TheStreet.com. He has previously obtained securities licenses under the NASD's Series 7, Series 24, Series 52 and Series 63 exams and has worked in the financial markets on various trading desks in addition to trading for his own account. Schultz holds a bachelor's degree in applied economics from Cornell University.