If you're like me, you probably think you've got it all figured out -- the important stuff, anyway. But just in case, I have a story I hope you'll take a moment to read.
In June 2007, and again one year later, I got on a plane and flew around the world. The idea was to test my ideas about the world, its markets, and its people. Along the way, I debunked five myths, making me a better investor and, I think, a better person.
Myth No. 1: Two wheels good ...
My first stop was China, a sprawling mini-continent home to more than 1.3 billion people. If you are at all like I was, you may be thinking "Man, that's a lot of Wizard of Oz-era Schwinns and pointy straw hats." And you'd be right -- 15 years ago.
Now it's a lot of cars. Don't misunderstand: I knew that Shanghai and Beijing -- with its five-loop beltway – was a thriving modern city. But if, for you, China's "smaller" second- and even third-tier cities conjure images of Chinatown circa the 1906 earthquake, you're in for a shock (more on the tier-two story in a moment).
In fact, in light of recent events, you can't help but wonder how much better off General Motors or Ford (NYSE:F) would be if they'd gotten hold of a bigger piece of this market. It physically pained me to discover that, beyond the occasional Ford Focus, Buick LaCrosse, and Toyota Camry, Volkswagen rules the roost in China's second- and third-tier markets. Or so it appeared to one American on the street in Shenzhen.
Myth No. 2: Small towns are small
Again, I knew Shanghai and Beijing would be big. What I didn't know is that the "smaller" tier-two cities are big, too. That is, until I had the pleasure of visiting five of the 20 or so Chinese cities bigger than Chicago. All are vibrant, modern cities -- no doubt twice the size they were this time last year -- my favorite being Xi'an, with its uncanny city wall.
Xi'an is also where I put to rest myths No. 3 and No. 4. The first seems a little silly in retrospect. I mean, maybe it's not completely insane to presume that a city home to IBM (NYSE:IBM), Intel (NASDAQ:INTC), and Applied Materials (NASDAQ:AMAT), among other Western technology giants, would speak a little English -- the so-called international language of science. But it's not true, either.
In fact, despite an infatuation with things Western, I doubt China's burgeoning middle class ever will adopt English as a second or "business" language. I don't think they'll need to. Just as it's clear that China's top businesses won't always rely on exports and massive trade surpluses -- for instance, the three we'll discuss just below.
And now for a delicate point ...
I mention my fourth observation cautiously -- having seen a tiny part of the country and knowing full well I may have this one wrong. But perhaps my biggest surprise was the buoyancy of the workers I encountered. I'm not sure what I expected, but these were not the ground-down, discouraged, and exploited laborers I'd read and heard so much about.
True, I visited a relative handful of Chinese companies. And some -- for example, travel agent Ctrip.com (NASDAQ:CTRP) -- are admittedly white-collar businesses. China Green Agriculture (NYSE:CGA), whose massive greenhouses we toured, is a relatively hands-on agri-science business, however. And our visit to China Fire & Security (NASDAQ:CFSG) included a tour of a full-scale factory, albeit a high-tech one.
To be sure, the living arrangements seem at odds with what we know here in the United States. Often, the workers, mostly young men and women from the countryside, live in dormitories on campus. But my impression is that they were happily employed, even happy to be there. They certainly are friendly -- and sure love their basketball.
Of this I have no doubt
Again, I know that human rights remains a challenge in China, and I have no illusion that all companies are as pleasant to work for as Ctrip, China Green Agriculture, and China Fire. Clearly, these three companies stand out among China's best. Which is a big part of why my colleague, global investing expert and Motley Fool Global Gains co-advisor Tim Hanson, named them his top picks from our 2008 and 2007 research trips to China, respectively.
It may also explain why one stock is up 100% and the other has more than quadrupled in a little over a year. And of this I have no doubt whatsoever: Disproving my No. 5 China myth -- my idiotic notion that Americans aren't welcome there -- was a pleasure. Having visited no less than half a dozen of China's cities, I can assure you that nothing could be further from the truth.
The people I met across China are among the most gracious and friendly I've met outside of Iowa. And this from a guy who accepted more than one dinner invitation with the awkward confession that "I won't likely eat anything with a head on it." (I feel oddly homesick just writing this column.)
The best China idea out there
But this is an article about investing, after all. As I mentioned earlier, my colleague Tim Hanson and I returned from our research trips to China in 2007 and 2008 with actionable investment ideas that are now up 100% and more than 200%, respectively. That's what got me thinking about this column today.
Tim just returned from another research trip -- this time to India. His goal was to dig up an investment opportunity that can earn you as much as his top picks from his previous research trips, including China Green Agriculture, which is up more than 500%.
I have a suspicion he's found it. If you'd like to hear more about what Tim and his team of analysts discovered on their recent research trip and get his No. 1 idea for your new money right now, here's how to do it. Click the link below and sample The Motley Fool's top global stock research for 30 days free.
Your first 30 days are absolutely free and there's no pressure or obligation to join. If you don't agree that Tim Hanson and his team are making you money, you won't pay a cent. To find out more about this special free trial, click here now.
Fool writer Paul Elliott doesn't own shares of any stocks mentioned. Ctrip is a Motley Fool Hidden Gems recommendation. China Green Agriculture is a Global Gains selection. Intel is an Inside Value selection. Ford is a Stock Advisor pick. Motley Fool Options recommends buying calls on Intel. You can see the entire Global Gains scorecard with your free trial. The Motley Fool has a disclosure policy.
