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12 Chinese New Year Names -- Part 1

This article originally appeared Jan. 29, 2014, on To read more content like this, plus see inside Jim Cramer's multi-million dollar portfolio for FREE -- Click Here NOW.

Friday, Jan. 31 is the Chinese New Year, marking the start of the year of the Horse. To relieve the stress of recent market action and have a bit of mid-winter fun, let's look at some investment possibilities around the Chinese Zodiac.

We will look at six today, on this eve of one of the most highly celebrated holidays in the world (at least 1.6 billion people will be enjoying the holiday) and six more on Friday.

Going into the year of the Horse, can we pass up taking a look at Churchill Downs (CHDN - Get Report)? Many investors don't realize this great American institution is publicly traded, and they can get a piece of the action -- especially around the Kentucky Derby. The stock is quite investable, with a $1.6 billion market cap and average daily volume of 64,000 shares. The company is highly profitable, earning $3.54 in the last four quarters, and pays dividend a bit less than 1%.

As you might surmise, CHDN comprises more than the classic venue -- they have several tracks, off-track betting, casinos and simulcasts. Gambling is a high-demand and relatively-stable business, so you will pay up for the stock. It trades at approximately 20x forward estimates.

Over the horizon is the year of the Ram (sometimes also cited as the Sheep or Goat) which evokes my interest in Rambus (RMBS - Get Report). Rambus was the original IP model technology firm, which blazed the trail for other "IP heavy, capital light" names such as ARM Holdings (ARMH), as well as Iconix (ICON), which is not in technology.

Rambus develops sophisticated semiconductor designs that it then licenses to others to manufacture and sell. It simply collects the royalties on sales of its products. This model produces low revenue, relatively speaking, but very high margins and little capital consumption. Concerns about a royalty rate cut from Samsung are overhanging the stock, but the Street may be underestimating 2014 growth -- they are modeling below-guidance revenue growth for the year. Rambus licenses designs for its legacy DRAM bus technology, new system-on-a-chip designs, and cryptography research.

The year of the Monkey draws my attention to American Public Education  (APEI - Get Report), affectionately known as "ape". This $770 million market cap company is well-positioned in a niche segment of the growing MOOC space (massive open online course). APEI operates two online universities that serve the military and public service communities. The company is 24 years old, generating over $300 million in annual revenue, and is profitable. Given its rapid growth recently, the multiple of 16x 2014 earnings per share is not unreasonable.

Could we let the year of the Rooster symbolize any name other than Yum! Brands (YUM - Get Report), the multi-concept restaurant chain operator that is highly leveraged to China due to its huge success there with Kentucky Fried Chicken? As emerging market fears (and especially China fears) overtake U.S. investors, the stock has been deep-fried, declining 11% this year.

While I do not totally dismiss the potential issues, the optimistic way to view Yum is -- dare I say it? -- the "chicken" emerging markets play. Yum has the upside exposure, but in an emerging market rout you still have the base of non-China business to support it -- whereas an emerging market ETF for example will get clobbered. Yum! can be used as a conservative way to capture upside at reduced risk once EM fears subside.

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