China 's economy is still on a roll. Maybe not at the breakneck
speed of the past decade, but the economy is still growing at a
comfortable 9-plus percent.
The China Academy of Social Sciences most recent GDP forecast
calls for 2010 economic expansion to finish 2010 at a 9.9 percent
rate, with similar growth in 2011. The government think-tank
predicts greater stability in China and little change in the
government's macroeconomic policies. The World Bank has projected
China's economy will grow 9.5% this year and slow to 8.5% next
Some foreign observers estimate that more than half China's
population falls under the definition of "middle-class", and have
concluded that in the next decade China's middle class population
will grow to 700 million. However, the Chinese government has
placed the middle class number at about 20 percent of the 1.3
billion people. Either scenario leaves more room to grow in the
Many U.S. investors are leery of investing in this growth, often
because many of the opportunities are so new. But many companies
are capitalizing on the homeland's rising middle class and
expansion into the global economic recovery.
Consider small cap manufacturer
Deer Consumer Products (Nasdaq: DEER).
Since the company began in 2006, it has grown rapidly and its stock
has risen 78 percent since it first became available in a July 2009
Not to be confused with American tractor maker
John Deere & Co. (
which is making inroads in developing nations (including China)
with its tractors and other equipment, this Deer is also a
fleet-footed global competitor more comparable to companies like
), National Presto (
Jarden (NYSE: JAH
You've probably seen Deer's products on U.S. retailers' shelves
- maybe you even own some. The company makes kitchen appliances
such as blenders and juicers. It makes appliances that sell under
the Black & Decker brand of
Black & Decker (
as well as Betty Crocker products, under a licensing arrangement
General Mills (
Deer also makes electric appliances sold by various retailers under
their own private labels.
But most important for Deer is the potential in its homeland
country of China. The company introduced the Deer brand in 2008 for
the China market because, according to its 2009 annual report,
"...urbanization, rising family incomes and increased living
standards have spurred demand for small appliances in China."
***Deer says that in 2009 it sold 7 million products to
customers on five continents. All told, Deer's products include
blenders, juicers, soy milk makers, pressure cookers, and
dehumidifiers, among others, which it says meets the safety
requirements in all markets where they are sold, including North
America and Australia.
For the third quarter, Deer reported that its profit more than
doubled to $9.3 million, from $4.1 million a year ago. Revenue
climbed to $55.3 million from $26.5 million, and the company
credited growth in the high-margin Chinese domestic markets.
Earnings per share were $0.28, up from the year-ago $0.18 and
topping analyst expectations of $0.21.
Deer also raised its full-year estimates, to $0.88 per share on
revenue of $172 million, up from $0.76 and $160 million,
respectively. In 2011, Deer places its net income and revenue
growth at 30 percent over the 2010 estimates. The company also
boasts a strong balance sheet, with $75 million in cash and no
long-term debt or credit lines.
***According to an analyst survey by Thomson Reuters, the median
12-month price target on shares of Deer is $17. That price target
implies shares are fairly valued at 14.9 times 2011 EPS estimates,
which seems pretty reasonable for a fast growing company.
But Deer's stock is down 20 percent from the 52-week high of
$13.80 posted in January. Given the impressive growth, investors
are presented with an excellent buying opportunity.
Deer appears determined to build its reputation with consumers
both at home and overseas. Currently I think the stock is oversold
at around $11.00.
Deer Consumer Products points to two of my favorite places to
invest: Small-cap stocks and the growth potential of China's middle
class. I've been following two additional China stocks in the
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