Seven Companies Ready to Rake in Cash!

“Gung Hay Fat Choy!”

That’s the Mandarin greeting for Happy New Year, and it was uttered by 1.3 billion Chinese last Thursday, which began the Year of the Rat.

The Lunar New Year is like our Thanksgiving, Christmas and New Year’s all rolled into an elaborate celebration of reflection, gratitude, renewal and hope. It is the single most celebrated holiday in China.

Children love the festivities because they receive new clothes and red envelopes called “hung bao.” The envelopes are decorated with lucky symbols and represent the wish for fortune and wealth in the coming year. The color red signifies good luck … and inside each packet is cold, hard cash!

Red packet money is given out by parents, grandparents, uncles and aunts, or anybody who happens to visit during the New Year’s celebration.

Red envelopes mean lots of cash for Chinese consumers (and some companies!)

If you’re a Chinese kid, the more visitors the better!

The tradition of red envelopes has even carried over into other holidays as well as the workplace. Many employers hand out their year-end bonuses in red envelopes stuffed with hundreds – even thousands – of dollars.

And this red envelope money is more than just a token custom in China …

This Money Is the Fuel for an Incredible Consumer Spending Boom in China

Look, Chinese youth aren’t that different from kids in the U.S. – they have a long list of things they can’t live without!

And if you understand how China’s young people will spend their red envelope money, you’ll find a list of successful companies who could see their stocks head to the moon.

Today, we’ll take a look at seven firms that I consider big winners of all this gifted money. They’re what I like to call “red envelope companies” …

Red Envelope Company #1:
China Mobile (NYSE: CHL)

The very, very first thing every Chinese youth acquires once they have the money is a cell phone. My kids seem to live on their cell phones. That’s even truer for Chinese kids because so many of their homes don’t have landline phones or personal computers.

Remember, cell phones are not only a Chinese youth’s lifeline to their friends; it is also the primary way they connect to the Internet.

Cell phones are wildly popular in China …

Red Envelope Company #2:
The 9 Limited (Nasdaq: NCTY)

Almost every day I have to chase my kids off the computer. They love to play what are called massively multiplayer online role playing games (MMORPGs), which are Internet-based games that let them play people from all over the world.

My kids especially love a game called “World of Warcraft.” It’s the most popular Internet game in the world, and The 9 Limited has the exclusive rights to market/distribute it in China. I suspect a lot of kids over there will be lining up to play!

Red Envelope Company #3:
Yum Brands (NYSE: YUM)

If Yum Brands doesn’t sound familiar, the three companies it operates sure will: Taco Bell, KFC, and Pizza Hut.

The Chinese love everything western, but they especially love eating out at a Pizza Hut or KFC. For many, it’ as close as they’ll ever get to the U.S. Heck, more than 50% of Yum’s sales come from outside North America, and its booming business in China is sending profits to the moon!

Hey, don’t almost all kids love fast food?

Red Envelope Company #4:
LVMH (Pink Sheets: LVMUY.PK)

The Chinese are very aware of designer labels, and some of the country’s most popular luxury items are extremely expensive Louis Vuitton purses. I see more Louis Vuitton purses in Shanghai and Beijing than in San Francisco or Boston!

While very few young Chinese girls will get enough red envelope money to pick up one of these handbags, plenty of working Chinese women will be more than happy to blow their bonuses on a shiny new purse.

The Chinese love eating at Yum Brands’ KFC and Pizza Hut restaurants.

Red Envelope Company #5:
Home Inns (Nasdaq: HMIN)

It wasn’t that long ago that travel restrictions prevented the Chinese from traveling around their own country. These days, the country’s citizens could spend a lifetime visiting everything their own country has to offer. Lots of younger people will do just that.

And while most Chinese can’t afford to stay at a Hyatt, Marriott, or Ritz Carlton, they can afford to stay at a Home Inn, the Howard Johnson of China!

Red Envelope Company #6:
New Oriental Education (NYSE: EDU)

The smart, ambitious Chinese youth, instead of spending their money on some consumer whim, will take their red envelope money and invest it in something that will pay them back hundreds, thousands, even millions of dollars down the road.

I’m talking about English classes, the key to winning the career race in China, or better yet, gaining admission into an American university. New Oriental will be there to accommodate these aggressive students, and rake in the cash along the way.

Red Envelope Company #7:
Companhia Vale do Rio Doce (NYSE: RIO)

While Chinese youngsters aren’t going to rush out and invest in a copper company, nearly everything they want — electronics, homes, and cars — requires lots of copper.

That’s why the Chinese call copper “red gold.”

According to Merril Lynch, China consumes two to four times as much in non-precious metals as the United States, and is responsible for at least 75% of the demand growth for many commodities.

This is precisely why state-owned Aluminum Corp. of China just bought a minority stake in Rio Tinto.

That brings me to …

My #1 Rule for Successful Investing

If you want to make the most of your money over the next ten years (at least!), invest in those companies that SUPPLY what Chinese consumers are DEMANDING, whether it’s cell phones, pizzas, video games or even natural resources.

All you have to do is follow the money from the red envelopes to company cash registers!

Best wishes,

Tony

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