Had you been lucky enough to invest $10,000 alongside Bill Gates -- currently the world's richest billionaire -- when Microsoft
But those returns are chicken feed compared to Liu Yongxing's.
Uh ... who?
Liu is the richest person in China. Around 1980, he and his three brothers founded a quail-breeding farm with $125 in the impoverished village of Gujia.
Today, the four brothers are worth more than $5.2 billion. For those of you keeping track, that's a ridiculous 80% annual rate of return over three decades.
That's why I studied the Lius' story -- to figure out what qualities we should be looking for in the next stock with tremendous upside.
1. Entrepreneurial zeal
The brothers display the same devotion to their work and knack for innovation as other great entrepreneurs like Gates, Gordon Moore and Robert Noyce of Intel
They were among the first quail-breeding farmers in Gujia -- they are, in fact, the reason it's now the quail-breeding capital of China. Within just a few years, they entered the pig feed business, becoming one of the first Chinese companies to employ advanced feed-production techniques.
Eventually, The Hope Group split off into four companies that invest in a variety of industries, from aluminum to power plants to hotels. They also own a major stake in China's first private bank -- Minsheng Bank -- in which China Life Insurance
For these efforts, the Lius have been celebrated by numerous government officials as heroes and entrepreneurial role models for China's rapid transition to a more open economy.
The Lius beat out their domestic counterparts by observing and adopting the management practices of their established foreign competitors. For example, in 1979, when Charoen Pokphand Group introduced a more efficient feed, the Lius imitated the Thai firm's production techniques -- and then undercut them on pricing.
3. Room to run
When the Lius entered the pig-feed market, their domestic competition mostly consisted of garbage and scraps that farmers fed their own animals.
That is to say, there wasn't much competition.
As the dean of Sichuan's Animal Husbandry Institute explained to the New York Times, "The Liu brothers are very smart and grasped the opportunity early," immediately after Deng Xiaoping's sweeping rural economic reform in 1978 and just as meat consumption -- and thus feed demand -- soared along with the rest of the booming Chinese economy.
And that location was crucial to their growth. The Hope Group would have never made it in the U.S., because our market is too mature and is populated by competitive giants like Archer Daniels Midland and Cargill.
Nor would an American-based multinational have generated these returns. Well-run local companies hold a significant home field advantage, as examples like Baidu
In this case, the Lius were able to successfully compete against foreign firms like Charoen Pokphand because of their local knowledge and relationships. Since Hope Group's founders had been rural Chinese farmers, they could build a powerful brand based on understanding their customers' needs.
Finding the next Hope Group
The Hope Group has never been publicly traded, and only a few companies will come close to replicating its success. Our team of analysts at Motley Fool Global Gains believes that stocks with that kind of upside will share many of the same qualities that allowed the Hope Group to turn a quail-breeding farm into $5.2 billion:
- Led by passionate entrepreneurs.
- Located in a rapidly emerging economy.
Companies that share these qualities are poised to profit mightily from the new wealth that is being created in rapidly emerging countries.
Not every stock in China or other emerging economies shares these qualities. But by selecting the ones that do, you'll expose yourself to today's billionaire-making opportunities.
If you'd like some help getting started, you can see our entire list of recommendations, and read all of our emerging-markets research, by joining Global Gains free for 30 days. Click here for more information.
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Ilan Moscovitz once turned chicken eggs and cream into a luscious chocolate tart. He owns shares of Ctrip, which is a Motley Fool Hidden Gems recommendation. Amazon is a Stock Advisor selection. Baidu is a Rule Breakers pick. Wal-Mart, Intel, and Microsoft are Inside Value recommendations. The Fool has sold puts on Intel. We can assure you that $5.2 billion is chicken feed to the Fool's chrome disclosure policy.
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