We sat down with Motley Fool Global Gains team members Tim Hanson, Nathan Parmelee, Nate Weisshaar, and Sean Sun and asked them three questions about why they're headed back to China. Here's what they had to say.
Q: Guys, the massive growth opportunities in China are still apparent, but the events of the past year have exposed the risks in this emerging market. Are you still bullish on China?
Nathan Parmelee: I'm still bullish on China, but I think investors had to relearn an important lesson this year: Emerging markets are risky and unpredictable. What this means when it comes to constructing a portfolio is that you want a multipronged strategy for capturing China's amazing growth. Investing in companies based in China is one of those prongs, Coca-Cola
As for the frauds we've seen exposed, we've always avoided companies where the financials or management didn't pass the sniff test or where answers to our questions didn't make sense to us. That said, it's the best-told stories and financial manipulations that end up being the most damaging frauds. We think we've avoided them, and our diversified strategy limits the damage of any one mistake when it comes along.
Q: Last year, you focused on the rise of the Chinese consumer. Is it safe to say you'll be focused on that trend once again?
Nate Weisshaar: I'd say that's a pretty safe assumption. We think the real story in China isn't just its massive economy, but where that massive economy is going in the future. Chinese exports are cheap because labor is cheap in the country and the government has spent massive amounts to make sure the infrastructure is in place to export goods. These days, though, wages are rising rapidly and China's low-cost advantage is eroding. The nation will need to move up the value chain and start catering to the desires of Chinese consumers if it wants to keep growing. This is where we think the best opportunities are going forward -- companies that can tap into the rising incomes and provide the goods that hundreds of millions of new Chinese consumers want.
One of the big stories for me recently has been the tightening of the purse strings by traditionally luxury-loving Japanese consumers. Fortunately for companies such as Coach
Q: Are there any company meetings you're particularly excited about?
Tim Hanson: Jiayuan.com
Sean Sun: First I was forced to surf the Victoria's Secret website when I was researching Limited Brands, and now I have to peruse Jiayuan's singles profiles all day. The sacrifices I make in the name of research integrity. (Just don't tell my fiancee).
Interested to learn more about what the team finds in China this year? Enter your email address in the box below to get all of their dispatches from the field starting Monday.
Nathan Parmelee owns shares of Coca-Cola. Nate Weisshaar, Tim Hanson, and Sean Sun own none of the stocks mentioned here. The Motley Fool owns shares of Coca-Cola and Coach. Motley Fool newsletter services have recommended buying shares of General Motors, Coca-Cola, Nike, and Coach. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.