Bryan Tycango has been covered in these pages before, but last year he moved over to Stansberry… and that presumably means we’ll be hearing a lot more from him, thanks to Stansberry’s dramatically larger marketing budget. I covered teaser pitches for his Asian Growth Stocks newsletter, which was pretty heavily promoted during the “China miracle” years and brought to the surface some pretty successful speculations (if you traded them fairly nimbly), including Travelsky Technology, Tata Motors and Nagacorp.

So what is it, pray tell, that he’s touting these days in ads for Steve Sjuggerud’s True Wealth Opportunities: China? Apparently, Tycango is building a “Next China Growth Portfolio” for that newsletter, and he hints at his three favorite picks in this teaser ad. They’re currently selling the letter for $1,500, with no refunds (that covers two years, after which it renews at I don’t know what price).

Here’s some of the pitch:

“I can almost guarantee you that this group will be the single most lucrative investment of the next 10 years – far outpacing big tech… biotech… cryptos… and even gold, which I expect to do very well in the coming years.

“During its last huge boom a decade ago, this group of stocks could have shown you gains like:

• 742% on a well-known bank (that’s bigger than PNC or Capital One)
• 774% on a famous real estate conglomerate
• 658% on a car manufacturer and
• 601% on a major energy infrastructure firm

“Gains that didn’t take 10 years… or even five… but barely over two years.

“Now, the same kind of boom is starting again.

“These businesses aren’t start-ups… or all-or-nothing gambles like small-cap biotech.

“They’re “meat and potatoes” companies in businesses that are easy to understand. Things that everybody uses.

“But they are unusual in one specific way.”

This is mostly just a “strong companies in emerging markets present great opportunities” pitch, which is something a lot of folks agree with… particularly now, with those markets as a whole (China, India, Brazil, SE Asia, Latin America, Eastern Europe, etc.) suffering from a long period of weak performance versus US stocks… in economies that, in many cases, should be growing more quickly than the more mature US market.

And apparently, many of these stocks are getting easier to trade… as just the time that they’re trading at better valuations and present a strong opportunity:

“Right in the middle of this explosive opportunity… these stocks are becoming widely accessible to millions of investors for the first time… creating a tidal wave of potential buying interest.”

And he calls on some other names you’ll recognize to bolster his argument:

“As Barron’s put it: ‘When the cycle turns upward, [these stocks] should outperform for seven to nine years. Contrarians, take note!’

“Now, that’s exactly what’s happening.

“That’s why BlackRock… JP Morgan.. and HSBC have all placed outsized bets on these stocks. So have billionaires like Ray Dalio and Stanley Druckenmiller.”

Tycango isn’t pitching China stocks here, though — despite the fact that this is the “China Opportunities” newsletter…

“I’m talking about the next Chinas – where the exact same kind of story is playing out again.

“Where hundreds of millions of newly wealthy consumers are fueling the growth of Amazon-like companies that most Americans have never heard of.

“The countries I’ve lived in, visited, and studied for my entire life.

“Take my word: They are the only places in the world where you can “go back in time” and get in on businesses similar to Google, Apple, and Netflix 20 years ago… when they were first appearing on the screens of millions of consumers.”

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So these are mostly Asian emerging economies, where there is certainly a lot of growth… he drops a few examples of where he’s looking:

“Taiwan… home to the second largest semiconductor company in the world.

“Indonesia… where nearly 200 million people are now online and where the average adult’s wealth has quadrupled in the last 20 years.

“Vietnam… the fastest growing economy in the world last year, where new millionaires are appearing even faster than in China.

“India… the ‘growth miracle’ that’s about to be the most populous country in the world – yes bigger than China….

“Most people don’t know this, but so-called “emerging markets” have outperformed the U.S. about half the time.

“Like gold, they tend to grow in furious cycles.

“And like gold, the cycle just turned in a big way.”

Is this a “ditch the US” argument? Not entirely… more from the ad:

“I’m not saying the U.S. is headed for collapse. Or that you should dump U.S. stocks. But I don’t think there’s ever been a more obvious time to think about diversifying – and getting at least some of your money out of the U.S.

“What most people don’t know is: The same “QE” madness driving gold higher is also great for emerging market stocks.

“A weak dollar makes it easier for these economies to repay their dollar-denominated debts… and buy up the energy and raw materials, typically priced in dollars, that are fueling their explosive growth.

“Just as important, there’s simply more money flowing through the global financial system, looking for a home where it can generate big returns.”

Where do we find these stocks? Tycango’s old newsletter often pitched stocks that were pretty hard to buy if you couldn’t trade in Hong Kong or other Asian exchanges… but apparently he’s keeping it easier this time:

“… as these countries – and companies – become major global players, it’s become very common to list on the NYSE or Nasdaq.

“Some have “primary” listings with three- or four-letter ticker symbols – stocks Alibaba (BABA) and Baidu (BIDU).

“Others trade “over the counter” with five-letter symbols. For example, Tencent (TCEHY).

“As an investor, it barely matters. You can buy either one the same way you’d buy shares of Apple (AAPL).

“More than 2,900 of these stocks are available today — with 100 or more being added every year.”

And then, finally, the hints about the three new stocks with which Tycango is launching is “Next China Growth Portfolio” — and we’re told that “all three of these stocks trade in the U.S., with ticker symbols you can plug in and buy from any normal brokerage account.”

“The first is the ‘Tencent’ of Asia’s wealthiest emerging market – but it’s less than one-tenth the size of the Chinese internet and gaming behemoth. This is exactly the kind of situation I’ve been telling you about, where the biggest gains are still ahead… and I expect it to follow a similar trajectory to Tencent (up 4,900% all-time).

“This company owns one of the most popular gaming franchises in Asia – a title with the same cachet as Star Wars or Marvel comics in the U.S. Its annual revenue has grown nearly 900% since 2015. Now it’s getting a massive boost from the surge in online gaming due to COVID. And it’s dirt-cheap today. It trades for around 2x its annual sales – five times cheaper than Tencent.

“I predict this stock could rise 1,200% over the next five years, if you get in today.”

That sounds a lot like Sea Ltd. (SE), the Singapore-based e-commerce, gaming and mobile payments company which until a few weeks ago was indeed “less than 1/10 the size of Tencent” (today, SE’s market cap is $77 billion, Tencent’s $656 billion)… but unless they’ve mis-hinted there it really can’t be — Sea does own one of the most popular mobile games in emerging markets, Garena’s Free Fire (similar to Fortnite, but easier to use on cheaper mobile phones), but the big disconnect from those clues is that it trades at more than 20X sales… though it has been on an amazing trajectory.

Revenue is up by about 700% in the three years SE has been US-listed, most recently doubling to about $3 billion over the past four quarters… and since 2015, when they report having had revenue of $292 million, that top line has indeed grown by 900%. Which, coincidentally enough, is almost exactly what the return has been for shareholders who bought near the US IPO in late 2017 (I bought it much more recently, back in May of this year at around $60 a share when I came across the name while researching eSports, and dipped my toe in slowly because it was expensive even then… but it has more than doubled since).

Given how well this stock matches otherwise, including the fact that many other folks have talked it up as a “Tencent of Southeast Asia,” is there a way we can match this up as a “2X sales” story?

Well, sort of… but that would mean you’d have to go by the gross merchandise volume sold through Shopee’s e-commerce business, not Sea’s actual revenue. That’s about $25 billion over the past year, or $32 billion at an annualized rate based on the huge numbers in the second quarter, so if you use that number then yes, SE is trading at close to 2X sales… you just have to include numbers that aren’t really their sales.

(By that metric, Shopify (SHOP) would look a lot better now, too — it’s trading at about 60X the company’s revenue of about $2 billion… but if you used gross merchandise volume (GMV) instead, and thought of that as SHOP sales, you’d be closing in on $100 billion in GMV for Shopify merchants over the past year, so the company is trading at only about 1.5X GMV. Pinduoduo (PDD), the Chinese e-commerce company, trades at about 16X sales or at about 1X GMV… you get the idea).

It’s very hard to argue against Sea Ltd…. it’s a fantastic company, well-positioned in all of the large markets of Southeast Asia (Vietnam, Indonesia, Thailand, etc.), and they’ve done a great job of building a hit video game and using the prodigious cash flow from that game to fuel investment in their e-commerce platform Shopee, which you can think of as being some combination of Shopify and Mercado Libre for the various markets of Southeast Asia (which are interconnected to some degree, but also each complex and unique, with different rules and cultures). Their revenue doubled last quarter on the strength of booming e-commerce sales everywhere, and like most of the world my assumption would be that once you try e-commerce, you don’t go back… these gains, to at least some degree, will probably be permanent and they’re unlikely to see a drop in revenue just because the pandemic gets under control.

On the flip side, of course, is the somewhat horrifying valuation. They’re not as absurdly valued as Shopify or some other hot names that are showing this kind of growth, but they’re sure expensive… and thanks to the hyper-competitive e-commerce market in most of their target countries, with Shopee mostly taking prime market share but fighting off well-funded competitors (like their neck-and-neck battle in Indonesia with Lazada, which is owned by Alibaba), they probably won’t be making money anytime soon (Sea is well-funded, too, they’ve got a good cash balance and they also boast Tencent as a substantial investor, and at these prices could easily raise more money whenever they want… but that competition does mean margins will be tight).

I’m still holding SE, both equity and long-term options, and wouldn’t talk anyone out of buying a nibble-sized position even at these prices, since I’m impressed enough with the current and potential growth to want to own it even if it’s expensive… but I haven’t been able to convince myself to add more shares to my holdings since July, when it was already above $120. Maybe I’m just too emotionally anchored on my entry price, and Sea Ltd. will keep soaring higher as the revenue lines keeps doubling, but certainly a lot of future good news is baked in at this price.

Tycango does also mention Sea Ltd. as a past recommendation earlier on in the pitch, this is how he describes it:

“I recommended it in True Wealth Opportunities: China last December – and showed readers a chance to nearly triple their money.

“It’s our biggest gain yet in True Wealth Opportunities: China.

“But Sea Limited isn’t a China company. It’s based in Singapore and does a lot of its business in Taiwan.

“It’s a ‘Hidden Blue Chip’ – the exact type of opportunity I’ve been telling you about today. The far and away best stocks anywhere for 1,000% potential upside over the next few years.”

Perhaps he’s got another midsize tech company that owns a big brand in a wealthy emerging Asian nation, that’s roughly 10% of Tencent’s size and in similar businesses… but I don’t really see one that’s as good a match as Sea Ltd.

Next?

“The second opportunity is a bank in a country where more than 300 million people have opened bank accounts in the past few years. Keep in mind, banks have been some of the most lucrative investments in past emerging market rallies. This one shot up more than 1,000% in BRIC madness of the early 2000s… and almost 400% in the two-year rally beginning in 2009.

“But now there’s a much bigger opportunity, that almost no one knows about. It involves $1.5 trillion of gold – much of it hidden in safes and mattresses. Now, for the first time, citizens can deposit the gold – store it safely – and earn interest. And with gold prices surging, many more will be looking to sell and deposit their newfound cash. Either way, this bank will be the clear winner. I expect it could triple, or more, in the next few years.”

That can really only be India, since there’s nowhere else (outside of China) with a population size that could support 300 million people opening bank accounts in a few years — and if we’re talking about Indian banks that had huge gains in the 2000s, then soared from the 2009 lows into 2011, then there are really just two candidates: The two biggest US-listed Indian banks, ICICI Bank (IBN) and the much larger HDFC Bank (HDB). HDB has been the better long-term performer, but given those hints, ICICI is the better match, thanks to its performance in the 2000s and from 2009-2011 (HDB followed similar trends, but not quite as close to the hinted numbers).

What’s this about gold, though? That’s not specific to a single Indian bank, but India is arguably the most important gold market in the world, with families routinely accumulating their wealth in metal form, and as part of the economic reforms in India in recent years they have begun encouraging people to deposit their gold in central repositories or in banks — and last year, the government made that process a little bit easier under the SBI Gold Deposit Scheme.

I don’t know how popular this gold deposit scheme is, or if it will drive meaningful growth in bank accounts and deposits, but yes, if India is able to get more people into the formal economy, as they’re trying to do, and if they can get another spurt of GDP growth going, that should generally be good for banks as part of the core economic infrastructure of the company… and ICICI presumably has a lot of room to grow, though it has generally underperformed its larger brother HDFC over the past decade (that shows in the valuation, ICICI trades at about 2X book value despite the fact that revenue has been growing a little faster than HDFC’s this year, HDB trades at about 4X book). I have not looked over either company in any real detail, but if you want to buy into a meaningful Indian bank, those are pretty much the two options… and they will likely trade together when it comes to big macro moves regarding the Indian economy.

There’s also State Bank of India (SBKFF), which is partially publicly traded and pretty big, with a market cap of about $20 billion (IBN is around $35 billion, HDB close to $100 billion), but that one wasn’t available for investment in the early 2000s, and has always traded at a meaningful discount to its more independent competitors — presumably thanks to that 70% controlling stake by the government, and the general failure to turn revenue growth into earnings growth.

One more?

“Finally, I’d like to show you the biggest opportunity in mobile phones anywhere in the world – by far. It’s the dominant mobile provider in a country where hundreds of millions of people are getting smartphones for the first time – just like the U.S. or China 15 years ago. This company has been profitable for years and reliably grown by 8%-10%. But now it’s about to kick into high gear. See, it’s spent a fortune on 5G infrastructure – which is now coming online. That’s going to add to the surge in mobile demand – at much higher prices.

“Oh, and this company pays a 4% dividend as well.

“This company has more than twice the market share of Verizon in the U.S. – in a similar sized country. Yet it’s 10x smaller! That won’t last. I expect shares could soar by 500% or more within a few years.”

There are a bunch of companies this could be… Verizon has about 35% market share, so twice that would be close to 70%… thinking about a “similar sized country” to the US would narrow it down, if you’re being generous, to Indonesia, Pakistan, Bangladesh, the Philippines and Vietnam (I said generous — those are all the countries in Asia that are currently between 100 million and 300 million people, the US is at about 330 million). India would be the country where “hundreds of millions of people are getting smartphones for the first time” in short order, outside of perhaps Indonesia, but none of the wireless providers there have near-70% market share (the biggest are Reliance Jio, Vodafone Idea and Bharti Airtel, each of which is pretty close to 30% market share). So which candidates stand out from those countries?

Globe Telecom in the Philippines, which is the market share leader in mobile, and seems to pay roughly a 4% dividend. That’s about a $6 billion company, so Verizon isn’t just 10X bigger, it’s more like 50X bigger… but still, that’s a reasonable match.

Still the Philippines isn’t really in the “hundreds of millions” category when it comes to population — they’ve got just about 100 million people. Indonesia is much more similar to the US when it comes to population, with about 270 million people, and like the Philippines the smart phone penetration is pretty low, well under 50% by some measures, a little behind even India and Vietnam and way behind the “80%+” markets like the US and South Korea.

So could this be one of the Indonesian telecoms? Telkomsel has probably roughly 70% market share, so that matches the “twice the market share of Verizon” hint, and it’s owned by Telkomunikaso Indonesia (TLK, 65%) and Singtel (SGAPY, 35%). The second biggest is XL Axiata, owned by Axiata Group (part of which is public, XL Axiata, PTKXY OTC in the US).

That seems a little bit unlikely, if only because Indonesia is widely referred to as a “disaster” when it comes to 5G investment and planning — unlike a lot of countries, at least this author says they haven’t really gotten started. Still, Telkomsel is working on 5G to some degree, and does carry roughly a 4% dividend yield… and it is the biggest of these companies that you can trade easily, with a market cap of about $18 billion (quite close to the hinted at “10X smaller” than Verizon’s $245 billion).

Singtel is often a tempting idea as sort of a pan-Asian telecom conglomerate — it does carry a strong dividend yield at 6%+, like a lot of other telecom companies, and also a fair amount of debt… though it has also been collapsing this year as a stock, the US-traded shares are now below $16, just about matching their lows in February of 2009.

Singapore Telecom (SGAPY for the US ADR) gets some attention from investors not really because their home market is exciting, but because they own significant stakes in several telecom companies. Singapore itself is pretty tiny, but Singtel owns Optus in Australia, a third of India’s Bharti Airtel, 35% of Telkomsel in Indonesia, 47% of Globe Telecom in the Philipppines, among a few others… and the company is also majority owned by the Singapore government, so outside shareholders have a limited amount of sway.

It’s been a rough year all around, of course, and Singtel has felt it — Australia is their most important single market right now, followed by Singapore and then Indonesia, but they also took a big hit on having to record some big costs from Bharti Airtel in India, of which they are the largest shareholder, and they halved their dividend, which is all bringing the shares down.

Will that turn around? I don’t know. It wouldn’t surprise me, but costs for telecom companies are also going up as they invest in modernizing and upgrading to 5G… and in several of these markets, particularly Singapore, Singtel is also exposed to declines in traditional telecom — land lines and cable TV subscriptions. Over the past several years, Singtel has essentially paid out half of their cash flow from operations as dividends, and spent the rest on capital expenditures (that’s an overgeneralization, but mostly true), but their top line revenues have mostly been in gradual decline as their operating costs have risen, so there’s been some pressure on the net income. I can see that turning around if we have another strong period of GDP growth across emerging Asia, particularly if there’s good growth in Australia, India and Indonesia, but I don’t know what the odds are.

I’m guessing — and this is just a guess, sadly, that Telkom Indonesia (TLK) is the stock Tycango is pitching here, if only because of the huge and often underappreciated size of the Indonesia market (challenging though that market is, comprising thousands of islands… only recently connected by a big loop of undersea fiber-optic cable to support mobile data backhaul that is urgently needed). The more interesting company story is probably Globe Telecom, which has grown aggressively over the past decade to take over the top slot in mobile in the Philippines, overtaking the incumbent Philippines Telecom (now called PLDT, owner of the Smart mobile network — they’re US-listed, ticker PHI), and they were the first company to launch 5G on a commercial scale in Southeast Asia last year (though not nationwide yet, of course). Globe trades at GTMEY or GMTEF in the US.

The biggest challenge for Globe Telecom, I would guess, is that they’ve got a third player coming on the scene — President Duterte has been pushing for more competition and better service in mobile, and essentially invited in China Telecom to compete through a company called DITO Telecommunity (a consortium of Udenna, which is mostly a Filipino energy and infrastructure conglomerate, with toes in other busiensses, and China Telecom — they won’t be launching their competing service until next year, but if they want to go in big with a price war that could hurt both Globe and PLDT). Given all that, frankly, it seems silly not to start with considering Singtel — you get meaningful stakes in companies that have large mobile market share in India, Indonesia, Singapore, the Philippines and Australia. It’s just that the performance of all of the above has been fairly weak so far, so you might have to have a strong stomach and a bit of a bold eye on the future to talk yourself into owning any of them.

So that’s your quick run-through of the stocks that Tycango seems to be hinting at in his latest push — have any other favorites you’d consider? Like a particular emerging Asia telecom over the others, or a particular Indian bank? Think there’s a better “might be the next Tencent” idea than Sea somewhere in Asia? Let us know with a comment below.

Disclosure: Of the companies mentioned above I own shares of and/or call options on Sea Ltd., Google parent Alphabet, and Apple. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.