This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

China Stocks to Bet on Consumers - Part 2

Stocks in this article: SPUCCSCCNGL

Editor's note: Following is part 2 of an article that looks at China stocks focused on the newly emergent Chinese consumer. Here is part 1.

Rick Pearson is a Beijing-based private investor focusing on U.S.-listed China small-cap stocks. He is a contributing writer to TheStreet whose views on these stocks are independent of TheStreet's news coverage.

BEIJING ( TheStreet) -- Aside from travel, another promising China consumer play is the food and beverage sector.

I carefully evaluated China Nutrifruit Group (CNGL), SkyPeople Fruit Juice (SPU) and Country Style Cooking Restaurant (CCSC).

Of these three China stocks, I like SkyPeople the best and recently have been buying its shares. I also like Country Style Cooking Restaurant, but its shares are simply too high for my criteria, so I am holding off for now on that name.

SkyPeople Fruit Juice is a small-cap China stock with a top 10 auditor and a booming high-margin business that caters directly to consumers with a rising disposable income.

The stock is not widely followed and trades with a price-to-earnings ratio of only about 5, so it has the potential to easily double this year.

I recently toured the company's two factories in Xi'an. I also met with its distributors and purchased its products from WalMart (WMT) in Beijing as well as from several retail locations in Xi'an.

In total I spent four days on the ground to get a better feel for the company and its prospects.

I was so impressed that after my visit I went back to my hotel and started buying shares as soon as the U.S. markets opened.

SkyPeople has a net margin of nearly 25% and has cash of roughly one-third of its market cap.

The reason the stock trades so cheaply is that investors still don't seem to understand the seasonality of the company's business, something that is dictated by the seasonal fruits that it processes.

By the end of the second quarter, the company effectively runs out of inventory, putting a cap on sales potential.

The December quarter is the strongest quarter and will show the strongest financial performance -- sometimes as much as 50% of annual net income.

Despite the obvious seasonality, investors have sold off in the past after weak quarterly results in the slow season and then started buying again in stronger quarters.

RELATED STORIES:

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs