Editor's note: This is the fourth article in a series on investing in China. The previous columns were China Investing: Like a Kid in a Toy Store, How (Not) to Invest in China and Catching China's Uplisting Wave.There are plenty of reasons to invest in China. China never was in a recession and has been growing at twice the fastest rate we've seen over here in a couple years. They make less than us per person, and they save. They want what we have. And rumors are that their new "more entitled" generation spends more. Here's my advice: Set up a trap to funnel their money your way. My ideas for investing in China aren't your generic plays like the two popular ETFs: iShares FTSE/Xinhua China 25 Index ( FXI) and PowerShares Golden Dragon Halter USX China ( PGJ). Here are my four ideas for the "sophisticated" investor.
- First, companies that are priced more cheaply than the profits that they are going to make in the next year are growing harder to find by the day. Here's a pick that is cheap, growing and sophisticated. It's China Organic Agriculture (CNOA).
- Second, how about a company that makes cactus-based cigarettes that are slotted for launch later this year after they were awarded the patent last year heading into the market crash? China Kangtai (CKGT) has three years of steady growth, future growth under progress and is priced to shrink.
- Third, let's look at a company with a market cap of less than $100 million, capable of working projects in 7-star hotels, having just announced a new agreement worth $500 million. Oh, don't forget that the backlog is $636 million. As an engineer, I can say the buildings CAE (CAEI) works on are by far some of the most advanced I've come across in my lifetime.
- Fourth, interested in going nuclear? With a market cap of $11 million and being the only publicly traded Chinese company with the ability to produce nuclear graphite, China Carbon (CHGI) is your ticket to profits off of China's target of 40 nuclear reactors by 2015.