...and Diesels There
12/31/2004 12:00 am EST
When it comes to investing in China, Don Straszheim is among the most sought-after authorities. The former chief economist for Merrill Lynch now runs a boutique research firm, which specializes in finding US-listed firms that are poised to benefit from China's growth.
"My top pick for 2005 is China Yuchai (CYD NYSE), a big, diesel-engine manufacturer in China. We see great prospects for this stock, riding the economic growth wave in China. As the economy prospers and grows, we expect to see strength in transport of goods and people, increased demand in the electric power industry, increased manufacturing strength, and a construction boom of unprecedented proportions. Better road infrastructure being built is an added plus.
"The stock is currently recovering from a 2003 speculative spike in price, which was followed by a panicky sell-off. This is a way to play China with the investor protections of SEC and an NYSE listing. We emphasize that there is no 'state ownership' in this small-cap company ($400 million market cap) company. We initially recommended this stock on 9-15-04 at $12.50, and the stock is currently trading at $14.17. Our target price for this selection is $20 per share by year-end 2005."