Paul Goodwin’s “My No. 1 China Stock” Pick

Sniffing out the current teaser from Cabot China & Emerging Markets Report

By Travis Johnson, Stock Gumshoe, June 23, 2014

Paul Goodwin edits the Cabot China and Emerging Markets report, which is really the only surviving China-focused newsletter I can think of from a big publisher (most publishers had such a letter during the China bull run in the mid-late 2000s, but many of them disappeared in recent years as China got to be as much a “fear” topic as a “greed” one).

He’s been teasing his No. 1 China Pick recently, and many readers have asked about it, so although we already revealed this “secret” stock in a teaser solution that ran in the Friday File for the Irregulars back in March, I thought we should take another look today… and also get the name out there for the rest of the gang in case you’re curious.

Goodwin actually acknowledges the collapse in Chinese stocks of a few years ago, and the weakness that shook out the newsletter ranks, though he does so in effectively bragging that theirs was the only China-focused newsletter to survive that downturn (which is probably close to being true, I know of several China letters that closed, and others that broadened their focus or changed their names to get a “fresh start”). Here’s how he puts it:

“All the other China-focused investment advisories collapsed in the downturn because they didn’t understand the trends or the sectors or how to take advantage of and profit from investing in little-known U.S.-traded China stocks with huge earnings growth potential.

“That’s why their readers lost money and canceled their subscriptions and these publications were forced to fold their operations… while we continued to make our readers a bundle.”

Well, according to Hulbert Cabot China and Emerging Markets had an awful time in 2008 and in late 2011 just like almost any other China-focused or emerging markets stock picker, and their five-year record is pretty much flat… but they have done very well over the past year to bring that long-term average up to “flat” as markets hit records and enthusiasm returns and as folks started betting on China again, the newsletter (again, according to Hulbert) posted a 45%+ return over the last twelve months.

So they are not magical, but they have been survivors in the emerging markets space… so I guess that’s worth something.

What are they pitching now? Here are the clues:

“Just like my top auto, entertainment, Internet, and social networking picks that doubled our readers’ money four times in 2013, my No. 1 China stock now matches the same profit profile.

“Here’s why:

  1. The stock is a fast-rising star in a global $204 billion industry.
  2. It’s a new stock that’s already up 98% in three months.
  3. It registered 198% earnings growth for its first quarter.
  4. Analysts expect it to register another 203% next year, clobbering the S&P 500 by more than $20 to $1.

“What I like most about this company is that:

  1. It doesn’t have a single U.S. competitor and never will,
  2. China only licenses two companies to profit in this fast-growing sector, and
  3. It’s outperforming its No. 1 competitor nearly 100 to 1.”

So who is it? One more bit of clues:

“My No. 1 recommendation is one of only two companies authorized by the Ministry of Finance to provid