Asian shares trade mostly lower as sentiment takes a hit following weaker-than-expected consumer confidence data out of the U.S. Dow Jones Newswires’ Puja Rajeev reports.
Jerry Jordan thinks a lot about investment themes and cycles when he’s searching for under-appreciated stocks for his mutual fund.
Take China: Its emerging urban population has more money to spend on food and entertainment. Recognizing the profit potential from that theme, Jordan poses two key questions: Where in the cycle is the demand, and how do I invest in it?
China’s middle class will likely grow to rival that of the United States, the Jordan Opportunity Fund /quotes/comstock/10r!jordx (JORDX 10.71, +0.06, +0.56%) manager said. “We’re trying to find ways to play the Chinese consumer through a number of different holdings.”
One of his favorites is Deere & Co. /quotes/comstock/13*!de/quotes/nls/de (DE 57.30, +0.34, +0.60%) . Sure, a consumer isn’t likely to buy a combine harvester that is among the agriculture machines the Moline, Ill.-based giant manufactures. But China needs such equipment to support its population. “The next 20 years are going to be about food and water,” said Jordan. He also notes that farmland is disappearing at a time when food and energy demands are surging.
Deere, he maintains, will be key to harvesting grains for food and bio-fuel. “We’ll see grain prices double, tripe or quadruple,” Jordan said. “As the largest provider of agricultural equipment, Deere will be a huge beneficiary.”
In trading Tuesday, shares of Deere fell 1.1% to $56.09.
That burgeoning middle class will be looking for leisure and entertainment, and Internet games will be among them, Jordan said. That’s why he likes NetEase.com Inc. /quotes/comstock/15*!ntes/quotes/nls/ntes (NTES 38.86, +0.49, +1.28%) , an interactive online gaming business based in China but traded in the U.S.
The company has a market capitalization of under $5 billion, turns in sales of about $500 million and is expected to earn close to $3 a share in 2010, Jordan said. Shares of NetEase.com closed Tuesday at $37.44, unchanged. “It is an incredibly cheap stock,” Jordan said.
Jordan’s third recommendation, News Corp. /quotes/comstock/15*!nws/quotes/nls/nws (NWS 15.75, -0.07, -0.44%) , isn’t solely an investment in China. But the parent of MarketWatch.com, the publisher of this report, does have a substantial presence across Asia.
Jordan also believes that media stocks have troughed and are poised to rebound.
News Corp. is among media companies gearing its business model toward paid content, which Jordan likens to “tightening the screws.”
“News Corp. is saying, we produce an amazing product that requires a lot of time, a lot of history and is incredibly difficult to reproduce and we’re going to make you pay for it,” he said.
Media companies that charge will see subscriber rates decline, Jordan conceded, but he’s convinced that people will pay for what they want to watch and read. At the same time, he expects advertising rates to improve.
In U.S. trading Tuesday, shares of News Corp. fell 1.9% to $15.61.
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