Big day for Disney yesterday ... China gave it
a thumbs-up to toss $3.5 billion down the rabbit hole. The money will be
spent on a giant Disney theme park in Shanghai. What company wouldn’t be
jumping for joy at the opportunity to tap into a population of 1.3
billion people?
So why am I getting this queasy feeling?
For one thing, remember what we told you
yesterday about China’s
Ghost Malls... beautiful, modern, extravagant malls that are 99%
empty.
Could the same thing happen to Disney? A ghost
theme park? No, of course not. But a lot of things could go wrong. Like
...
• The U.S.’s relationship with China.
It can get testy at times. And China’s leadership isn’t above whipping
up anti-American sentiment when it suits them. Disney could get caught
in the middle of it.
• A thrifty middle class.
China’s middle class totals around 500 million people. Big, yes? But
they make much less money than America’s middle class. Plus, they save
much more than we do. Will China’s middle class spend their
hard-earned cash at Disney? Affordability could kill the golden goose.
• Competition. There’s only
one Disney. It’s an American institution. But the Chinese are great
copycats. You can count on Chinese versions of similar theme parks
springing up. And they’ll be much cheaper.
• The missing piece.
Disney’s park in Paris started out with low attendance. For over a
decade, the smart people at Disney couldn’t figure out what was
missing. In 2005, they finally hit on it. The missing piece was
alcohol. Once Disney allowed alcoholic drinks to be served on the
grounds, attendance shot up. What will be missing from Shanghai’s
Disney park? I don’t know. And neither does Disney.
A lot of things will have to go right for
Disney in China. If they don’t and the stock drops, we may be presented
with an opportunity to buy Disney at a substantial discount. We’ll keep
you posted.
Asia’s Forgotten Country
The Philippines is not your run-of-the-mill
Asian country. Sure, its economy is export driven (like that of a lot of
Asian countries). Like India, it has a lot of backroom support and call
centers – mostly for American companies. And, like the rest of Asia,
both its exports and support-center growth have taken hits from the
global recession.
But the Philippines taps into a revenue source
that few countries have access to. I’m not talking about money from the
IMF ... or the Asian Development Bank ... or the drug trade.
The Philippines gets a big chunk of revenue
from Filipinos working all over the world.
Money sent to the Philippines by overseas
workers is the most resilient part of the country’s economy. There
hasn’t been much of a fall off in this revenue stream despite the state
of the world’s economy.
No other Asian country has this kind of
insulation from the global recession.
No wonder it’s one of the safest Asian
countries to invest in.
So How to Invest?
One of its biggest businesses is the
Philippine Long Distance Telephone Co. (PHI). It’s listed on the New
York Stock Exchange.
It has a pretty good track record, as you can
see, having more than doubled investors’ money in five years.
It’s especially good when you realize he S&P
500 would have given you a loss over the same period. AT&T would have
given you back nothing. And Verizon would have handed you a 28% loss.
And, right now, you can buy PHI at a 29%
discount compared to what other telecom companies are going for on
average.
Welcome Back CNOOC
CNOOC’s (China National Offshore Oil Corp.)
relentless quest for oil resources has led it all over the world.
Ghana, Nigeria, Kenya, and Argentina have all
been CNOOC targets. And it has joined Brazil’s Petrobras in developing
some of its immense offshore oil basins. In short, CNOOC has become the
most aggressive oil major in the world.
Their aggressiveness has not been well
received in the United States. Remember CNOOC’s last visit? Back in
2005, it tried to buy Unocal for a cool $18.5 billion. Howls of protest
from all areas of the country sent CNOOC back home with its tail between
its legs.
CNOOC is taking it much slower the second time
around. It bought small stakes in four deepwater exploration licenses in
the Gulf of Mexico from Norway’s Statoil. The size of the deal is
secret, but Statoil said it was small
Welcome back, CNOOC. We missed you.
It’s easy to like this company. Most oil
companies have pared back spending. Not CNOOC. It’s increased its
spending. Last year, it spent 34% more on production drilling. This
year, it’s on track to spend another 19%.
Andrew Gordon recommended CNOOC to his INCOME
subscribers a few months ago. They’ve already made 22% on their CNOOC
shares.
You don’t have to believe in China’s Perpetual
Growth Machine to like CNOOC. CNOOC’s stage is the world, not little ol’
China. It has shown that it’ll go anywhere for a barrel of oil. CNOOC is
poised to make Andrew’s readers much more than 22%. If you would like
to know more about his INCOME picks, check out
Sound Profits when it debuts next month.
Invest Safely,
Bob Irish
Investment Director
Investor's Daily Edge
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