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Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Chinese tech stocks have been going crazy. They’ve been doubling, tripling, sometimes more, in less than a year. Dennis, you've got three China stocks: China Telecom (CHA), China Mobile (CHL), and PetroChina (PTR). Why are they so hot?
Dennis Kneale, Managing Editor: I think they’re really hot, and they’re really safe. Now they’ve only gone up, oh, 50-100%, all of them, since January. But here’s the thing: Pound for pound, when you compare them against US tech companies, they’re like half the price of US tech companies. My favorite of these three is China Mobile. Think about this: Cellular carrier, it has 150 million subscribers, more than any other company in the world. China is now the world’s biggest cellular market. China is now the world’s biggest PC market. Anybody who doesn’t invest there is either a coward or a fool.
David Asman: All right, Matt. You have a couple of stocks as well?
Matt Schifrin, Senior Editor: Absolutely. I’m with Dennis on this. I have one called UTStarcom (UTSI) which is a wireless infrastructure stock in China.
David Asman: Wireless infrastructure. It means they set up the poles?
David Asman: Look at how much they have gone up. UTStarcom has gone up 116% and NetEase.com has gone up 468% since their 52-week lows. An incredible rise, but you say it’s not too late?
Matt Schifrin: It’s actually pulled back. It’s a good buy. And NetEase.com as well, it’s an Internet portal, it sells for 26 times earnings, versus Yahoo! which is 76 times earnings.
David Asman: OK, we have to move it around. Now, Chana, you think maybe another place in Asia would be a place to put your money?
Chana Schoenberger, Staff Writer: Japan. We recently had a big Asian telecom exec come in, and he told us that he thinks China is just…it’s not getting there. Japan, on the other hand, has cleaned up its banking, and the Nikkei is doing really well. Now, recently it’s gone down because of telecom fears, but I wanted to mention the iShares MSCI Japan Index (EWJ), which is an ETF traded fund that I own.
David Asman: It’s an index that sort of tracks the Nikkei average.
David Asman: OK, and we do have to emphasize that you own that stock. Jim, you’re not bullish on Chinese stocks either, right?
Jim Michaels, Editorial Vice President: Well, I don’t know about bullish, and I don’t know whether I’m a coward or a fool, but I am a chicken. And when I see stocks double in less than a year, when I see the retail investors starting to come in at the end of a boom, that makes me very nervous. This is treacherous territory. If you think we have phony bookkeeping in this country, wait until you take a look at what’s happening in China.
David Asman: But you do have a suggestion?
Jim Michaels: My suggestion is that if you’re going to go into this territory; and it’s damned interesting territory; go with a guide. I like some of these closed-end investment companies. I happen to own Templeton Dragon Fund (TDF), you can actually buy it at a slight discount from book value, I’m not sure I’d go heavy in it at this price, but that’s the way I’d go in China.
Makers & Breakers
Susan Breakefield Fulton, Co-founder of Fulton, Breakefield, Broenniman: MAKER
We like Nokia because they’ve done the right things in a terrible market. They’ve continued to gain market share, they’re up to 38% of their market. They have no debt. They’ve come out with a wide variety of phone systems, a lot for the younger generation which loves the phones.
David Asman: And they’re trading at about $18 now (Friday’s close: $17.79), how high do you think they could go?
Susan Breakefield Fulton: We think $20.
Jim Michaels: BREAKER
I know the Japanese are running around, taking pictures with their cell phones, Nokia is supposedly the leader in that. But look, it’s a great little company but let’s look beyond the glamour. They make a commodity product. Within a couple of years anything they do, the Japanese, the Koreans, the Chinese are going to undercut them. 80% of their business comes from cell phones, it’s not a business with a great future.
Elizabeth MacDonald: BREAKER
I’m a breaker on this stock. Yeah, they’re the number one maker, right? They’re in an overcrowded sector though, and I see revenues coming in flat and profits kind of going into negative territory, on average for the last 3-5 years. I think they’re in a really tight spot right now. We’ll just have to wait and see.
Susan Breakefield Fulton: No question that they’re in a really tight spot, but they’re doing the right things with it. They’re gaining market share. They’re going into the two-way walkie-talkie against Nortel (NT).
Susan Breakefield Fulton: MAKER
DENTSPLY is fascinating because teeth become very important when you get older or when you get richer. And the American population is getting older, so that market’s increasing. And the overseas population is getting richer. So DENTSPLY actually sells three times the supplies of any other company.
David Asman: And they make more than false teeth, we should say. All the fillings and everything else. Now it’s trading at about $43 (Friday’s close: $43.08), how high do you think it will go?
Susan Breakefield Fulton: We think $50.
Elizabeth MacDonald: MAKER
This is a great stock, I’m a maker on this. You’re absolutely right. As the baby boomers age, they’re going to need more of the products that this company sells. Half of their sales come from international regions. I think this is a solid stock, I see positives across the board. It’s in their numbers too.
Jim Michaels: BREAKER
I love my dentist, but when I looked at the bills, I think I want to invest in a piece of this. With DENTSPLY you’re getting a piece of the dental business, which can only grow.