Don't read too much into yesterday's news out of China.
The world's most populous nation may have set its economic growth rate target at 7.5% -- a slight yet calculated decline from the 8% rate it had stuck to since 2004 -- but this doesn't mean that China's the new Greece. Most countries would be overjoyed to see their economies expand at half of China's clip.
China's been averaging closer to a 10% growth rate over the past few years, so perhaps the goal shifting from 8% to 7.5% is bigger than it seems. Last year -- a brutal year around the globe -- China still managed to nudge its GDP 9.2% higher.
Some argue that the move is primarily symbolic. It's China's top brass telegraphing to other government officials that the country will be moving away from focusing on sheer growth and redirecting some of that attention to environmental concerns and income inequality. In other words, China's already widening middle class is about to get even chunkier.
It's under this climate where investors should be embracing China's consumer-facing companies. Let's go over a few that I'm keeping an eye on.
51job
Shares of the online recruiter soared after posting better than expected quarterly results last week.
51job saw its revenue climb 23%, and its profit of $0.61 a share blew past the $0.53 a share that analysts were targeting. 51job's guidance for the current quarter is also well ahead of where the pros were parked.
51job got its start putting out weekly job listings in a few regional newspaper publications. It has capitalized on its brand by shifting to higher-margin online recruitment services.
Focus Media
No play on the rise of Chinese consumerism is complete without weighing in on advertising. Focus Media runs an enormous fleet of elevator posters, billboards, and a fleet of television monitors in high-traffic areas that blend ads with content.
Focus Media took a hit last year after a scathing Muddy Waters report accused the company of exaggerating the size of its advertising network. Focus Media has bounced back, and its move earlier this year to initiate a payout policy has been applauded.
Jiayuan.com
China's top online dating website posted disappointing quarterly results last night, if you can call a nearly 54% spike in revenue disappointing.
Unfortunately, margins were squeezed as Jiayuan ramped up its marketing efforts to stay ahead of hungry upstarts. The number of average monthly active users dipped sequentially to 5.2 million, but there's no need to be alarmed just yet. This is a seasonally sluggish period for online dating.
As China's empowered youth expand their dating options, Jiayuan and its popular model will continue to excel.
Baidu
Everybody knows Baidu, but China's dot-com darling certainly belongs on this list.
Focus Media is a welcome beneficiary of the advertising boom in China. Now throw the accountability of cyberspace and the country's online migration into the mix.
Baidu's on fire. Revenue and earnings soared 83% and 77% respectively in its latest quarter. You would expect to pay a dear premium for Baidu's consistent growth, but the stock may be cheaper than you think. As a result of analysts perpetually jacking up their profit targets -- only to see Baidu blow by them with ease -- the stock is fetching just shy of 30 times this year's projected profitability and only 21 times next year's estimated earnings.
Betting on China
Baidu and 51job have more than doubled since being recommended to Rule Breakers newsletter subscribers, though Jiayuan has been a laggard on the scorecard. It's time to discover the next Rule-Breaking multibagger. It's a free report. Want it? Get it.
