Looking for a way to play the burgeoning Chinese middle class without risking your shirt? Rule Breakers recommendation China Digital TV (NYSE: STV) might be the stock for you.
The company just reported second-quarter results that included a 29% year-over-year sales jump and 27% higher earnings per depositary share. That's the hypergrowth power of the increasing spending power in China.
China Digital TV specializes in making "smart cards" that connect set-top boxes and modern TV sets to digital cable services. You might be familiar with the CableCARD standard that does the same thing for American consumers; this is the Chinese equivalent. Stateside, you'll find CableCARDs made by Hauppauge Digital, Cisco Systems (Nasdaq: CSCO), and Motorola Mobility (NYSE: MMI).
Digital cable is a cost-effective way to send high-quality video signals, and it's very well suited to dense population centers like the ones you'll find in enormous Chinese metropolises.
There's no doubt in my mind that this market will grow quickly until China is saturated with digital video systems. China Digital TV is a leader in the field, but that's not the end of the story: "Industry leadership and superior execution have enabled us to deliver faster than market growth," says CEO Jianhua Zhu.
In other words, the company is growing its already dominant market share in a booming niche. Moreover, the stock is priced as if digital video was going out of style, even though most of China Digital TV's growth still lies ahead. What's not to love?
Interested in learning more about this outsized growth opportunity? I can think of two excellent ways to do that:
- Add China Digital TV to your Foolish watchlist, and frolic in a steady stream of news and Fool-approved analysis on the stock.
- Grab a totally free 30-day trial to our Rule Breakers newsletter service to learn why David Gardner loves the stock -- and what challenges he sees up ahead.
