11/28/2003 12:00 am EST
"China remains the obvious source of huge demand for commodity products," says Elliott Gue, editor of Wall Street Winners and co-editor of Personal Finance. " And with the listing of several prominent Chinese companies as ADRs on US exchanges, it’s possible to play the boom in Chinese demand even more directly."
"Sinopec (SNP NYSE) doesn’t drill for crude oil or natural gas. Instead, it’s focused on processing crude oil into other products like plastics, fibers, gasoline, and diesel fuel. Demand for such products is apparent: Sales rose close to 50% in the first six months of 2003 and show no signs of abating. But while the stock is up nearly 100% this year, valuations aren’t stretched. The stock is trading at a small premium to its book value and at only 12 times trailing earnings. Be prepared for volatility and buy Sinopec under 30 using corrections of 10% to add to positions.
"Meanwhile, aluminum is often an overlooked commodity. But it’s at the heart of a variety of industrial and consumer products. Aluminum Corporation of China (ACH NYSE) is a great play on Chinese demand for the metal. After recently reporting 11% growth in aluminum sales for the third quarter, the company raised its guidance on prices for the rest of the year. The stock has already run up a good deal in anticipation of higher aluminum prices but there’s more room to go. The best strategy is to accumulate the stock over time using dips to buy more. For now, buy China Aluminum under 55."