Note from Louis Basenese: For over a year, I’ve been screaming from the rooftops that the exploding use of mobile devices promises to be the fastest-growing – and possibly biggest – technological trend ever. In today’s column, my colleague, Larsen Kusick, of Growth Stock Wire, reveals a trading anomaly in Chinese stocks that further underscores my conviction. Enjoy!
It’s almost unbelievable.
While almost every “China stock” is taking a beating right now… being accused of fraud… or falling because investors are concerned about an economic slowdown, two China stocks are actually near their yearly highs.
Their strength comes down to one of the world’s biggest trends: the wireless boom.
Like Louis, I’ve been writing about this trend for nearly a year now. You see, mobile phones are among the few “must-have” products for China’s 1.3 billion people. Companies like China Unicom (NYSE: CHU) and China Mobile (NYSE: CHL) are like the Verizon (NYSE: VZ) and AT&T (NYSE: T) of China’s telecom industry.
Despite all the negatives going against China stocks, these names are defying gravity right now. Just take a look at the chart below.
Digging into the latest numbers, it’s no surprise. Every month, over a million people in China get a mobile phone for the first time.
China Unicom’s August results showed that the company reached 182 million mobile subscribers – up 16% over the past year. China Mobile reached a ridiculous 617 million subscribers – up 11% over the past year. (That’s not a misprint – China Mobile’s subscriber base is nearly two times the population of the United States.)
Both companies are improving their profitability by focusing on added revenue from products like data plans. Expensive smartphones such as the iPhone require the customer to sign up for a data plan to enable internet access. That means bigger profits for the carriers.
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And phone makers are taking advantage of the “must-have” status of smartphones in China. One popular phone model – the ZTE V880 – sold an average 8,258 units per day during August.
ZTE is one of the most popular phone makers in China. In the latest rankings, the China-based company reached No. 5 in terms of global marketshare, passing Research in Motion (Nasdaq: RIMM). Over the past year, ZTE nearly doubled the number of phones it sold. The only company that grew sales faster is Apple (Nasdaq: AAPL).
These numbers shouldn’t be a surprise to anyone following the “gadget boom.” They’re just the latest reminder that there’s no sign of a slowdown.
Tech research giant, Gartner, recently updated its forecasts for the global mobile device market. (Mobile devices include not only smartphones, but also tablet computers, laptops and any other gadget that connects to the internet.)
According to Gartner’s latest numbers, worldwide mobile connections will grow from around five billion last year to 7.4 billion in 2015. That’s a steady 50% growth spread over the next few years.
For investors, the important factor is how much money this will generate for the companies that operate mobile networks. Gartner expects the mobile data market to reach $552 billion in 2015. That’s a huge 115% jump from the $257 billion in revenue generated last year.
China Mobile and China Unicom are just two examples of companies that will make a fortune over the next decade. You can buy these China stocks as a speculative “punt” on the mobile/wireless boom. But you take on the ever-present “China risk” of fraud and scandal.
The safest way to trade and invest in this long-term trend is through dominant tech companies like Intel (Nasdaq: INTC), Qualcomm (Nasdaq: QCOM) and Apple. Intel and Qualcomm focus on making semiconductors and other parts that go into mobile devices. They sell billions of tiny “pieces” to companies, like ZTE, who put together the finished product.
Meanwhile, Apple’s iPhone remains the most prized status symbol in the world of smartphones. During the last three months, Apple sold nearly 20 million iPhones in China. That’s still less than 5% of the market… so there’s a lot of room for Apple to keep growing over the next few years.
Whatever route you go, it’s clear you still have a big tailwind at your back.