This post A Bold Prediction About 1 Chinese Stock appeared first on Daily Reckoning.
It’s fun to watch my fellow Daily Edge contributors Zach Scheidt and Alan Knuckman work.
They’re the best I’ve seen at spotting the market’s hottest trends.
Take for example Alan calling $75 oil months ago when it traded below $50 per barrel. Or Zach when he called the comeback of private equity. After all, who expected a stalling company like Blackstone to rebound the way it has?
I’m even more thankful for these calls because it makes my job a whole lot easier.
That’s because when Zach or Alan get excited about a new trend, that industry is almost certain to see some action soon, which is why I usually make it the first place I look for new recommendations.
This week is no different.
Alan has been all over this trade war rebound strategy, which is why today I’m going across the Pacific to talk about one of the largest stocks you’ve probably never heard about — that also currently trades at a massive discount!
Tencent Is China’s FANG Wrapped Into One
Although my expertise is in domestic dividend stocks suitable for investors that are either retired or on their way to retirement, this Chinese juggernaut is trading at such an attractive valuation that I couldn’t help but bring it to your attention.
Let me introduce you to Tencent Holdings Ltd. (TCEHY).
This is a $400 billion company that has strategically invested in all of China’s hottest technology trends.
Online advertising, e-commerce, social media, video games, e-finance, cloud computing, artificial intelligence, self-driving cars, you name it. Tencent is involved in every single one of these and more.
Tencent is what’s known as an investment holding company, meaning that they make strategic investments in a wide-variety of businesses and take a share of the profits when they’re made.
And they aren’t just investing in non-revenue producing startup companies. They’re investing in some of the world’s largest companies that just aren’t given the attention in the western world that they deserve. For example:
- Their most popular social media companies — WeChat and Tencent QQ — combine for over 1.8 billion monthly active users.
- Their online advertising companies are forecasted to account for 15.5% of China’s total 2018 online ad revenue.
- And their investments in extremely popular video game makers — Activision Blizzard and Epic Games, among others — have grown an average of 32% over the last five years. And that’s before Epic’s wildly popular game Fortnite went mainstream.
(Seriously, if you don’t know about Fortnite, ask anybody in the US under 30 years-old. Tencent owns 40% of Epic Games, the game’s creator.)
But up until this year, the market had already priced in these runaway successes.
TCEHY was up 126% in 2017 and up eightfold over 5 years — too rich for my blood.
But that all changed this year when tariffs became the talk of the financial media.
TCEHY has declined 20% since Trump enacted his steel and aluminum tariffs in March as investors are now pricing in the worst case scenarios for an “all out” trade war.
But my fellow Daily Edge contributor Alan Knuckman said it best:
“Chinese stock investors are soon going to realize what American investors have — that the global economy and the Chinese economy are doing well. When they do, they are going to take advantage of this chance to buy fallen stocks at cheap prices.”
You see, the noise and politics surrounding a trade war could continue for some time, but the strength of both the Chinese and American economies are undeniable.
The trade war will soon be settled with pen and paper and investors will once again focus on this more important factor instead of the flashy trade war headlines in the news.
And when this happens, every company that traded lower as misinformed investors panic sold will trade right back to their March highs — Tencent being one of them.
Yours for a stable retirement,
Patrick Stout
Managing Editor, The Daily Edge
EdgeFeedback@AgoraFinancial.com
The post A Bold Prediction About 1 Chinese Stock appeared first on Daily Reckoning.
From:: Daily Reckoning