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Charlemagne’s Gems: top stocks for the Chinese snake
by Julian Mayo on Feb 11, 2013 at 08:52
In a similar vein, we like Belle, the country’s leading shoe retailer.
China’s spending on shoes is only 35% of that of Korea and Taiwan and less than one-tenth of that of Hong Kong. This is another very profitable business, with gross margins of over 55%, with double-digit earnings growth.
We are also bullish on New Oriental Education, a provider of education services with 2.4 million student enrolments last year for their 750 learning centres and 18,000 teachers.
Education is a passion in Asian countries such as China and the company’s earnings are set to accelerate again, with 25% average growth expected over the next three years. The shares trade at a PE ratio of 16x for this year.
Finally, we favour Baidu, China’s dominant search engine. This has been growing at 40% per annum, but as with Google in other countries, faces the challenge of how to make money out of people searching using mobile phones rather than traditional desktops. This has resulted in recent weakness in the stock.
However, we expect growth to continue to exceed 30% for each of the next two years and 14 times 2014 earnings looks far too cheap to us.
As co-chief investment officer of Charlemagne Capital (UK) Ltd Julian Mayo (pictured) runs a range of funds, including the Magna Emerging Markets Dividend fund, which he has co-managed since June 2010.
According to Lipper, the fund has returned 15.1% in the 12 months to the 8 February, outperforming the 1.9% gain in the benchmark.
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