President Donald Trump has been searching for a way to punish China for its wildly unfair trade practices.
And he may have just found something in… solar panels. One week ago, a federal trade panel declared that Chinese imports of solar panels are hurting American manufacturers.
Ever since, you can bet that the White House has been mulling tariffs.
Don’t worry about it…
When we talked on Aug. 29, I told you not to be concerned about President Trump’s trade war threats.
And today I’m doubling down on that proclamation.
That’s because, instead of investing in Chinese importers, we’re focusing on internal growth in the world’s most populous nation – especially all those people’s quickening migration to the web.
Back in August we took a close look at the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ) as a bunker against tariffs.
And today I’ve got another one.
It’s great play on a $47 trillion Chinese tech market.
This market represents one of the fastest-growing global tech trends on Earth, according to new data from iResearch. This segment barely existed a decade ago but will grow by 422% between 2016 and 2020.
So let’s look at that data – and at a way to get in on this trend with a stock that’s already beaten the market by ninefold so far this year.
But maybe you’re still concerned about the wisdom of investing in a nation that President Trump has in his economic crosshairs.
From $9 Trillion to $47 Trillion… in Five Years
China and its 1.3 billion people have rapidly adopted the mobile phone as their primary means of accessing the online world – especially for shopping.
No wonder the new data from iResearch shows that mobile payments in China is quickly eclipsing whole other industries. In 2016, the sector was worth $9 trillion, large enough to give it the same value as the world’s fourth-largest economy.
Measured against this mega-trend, it’s almost impossible to overstate the success of Alibaba Group Holding Ltd. (NYSE: BABA). It launched in 1999, long before the web had any real presence in China.
Today, the e-commerce giant sells goods through its online and mobile outlets in 40 categories and operates in 190 countries.
It’s famous for Singles’ Day, a Valentine’s Day-type holiday that also is world’s largest online shopping event. Last Singles’ Day, Nov. 11, 2016, Alibaba did $17.8 billion in sales in just 24 hours.
To become a mobile payments powerhouse, the company launched Alipay in 2004 and has pushed it to a dominant role.
Alipay now has some 400 million active users and accounts for about half of China’s mobile payments. It’s a smart play – Statista says that as of June the number of mobile contracts in China was nearly the same as the nation’s population, coming in at 1.36 billion.
But that’s just half of the equation. After all, Alibaba is a great e-commerce firm in its own right.
To get a sense of why it can double your money in the next three years, let’s run it through the five “filters” of Your Tech Wealth Blueprint.
These “rules” help us pinpoint the most exciting and fastest-moving opportunities so you can safely capture wealth – and have a better life now and in retirement.
Take a look…
Tech Wealth Rule No. 1: Great Companies Have Great Operations
These are well-run firms with top-notch leaders.
Alibaba Executive Chairman Jack Ma is clearly a visionary leader. He saw the potential for this firm even before most Chinese had personal computers or web connections.
A recent piece in Barron’s suggests that Ma may be a better leader than even Jeff Bezos, CEO and founder of Amazon.com Inc. (Nasdaq: AMZN).
Of course, that’s a matter of debate. But this much is clear…
Alibaba has 10 times the profit margins of Amazon.
Plus, Ma has an ace up his sleeve. The firm’s CEO is Daniel Zhang. He was the architect of Alibaba’s big move into mobile and also helped launched Singles’ Day.
Tech Wealth Rule No. 2: Separate the Signal From the Noise
To create real wealth, you have to ignore the hype and find companies with rock-solid fundamentals.
Alibaba is no hype machine. Instead, it’s a giant tech conglomerate that just keeps finding new ways to make money. No amount of anti-China sentiment in the United States has dinted this stock’s rise.
More to the point, during the 2016 election and earlier this year, Wall Street worried that Trump’s China bashing would hit associated stocks.
Had you sold this “Trump-proof” stock at the beginning of this year, you’d have given up the chance to double your money.
Tech Wealth Rule No. 3: Ride the Unstoppable Trends
We look for stocks in red-hot sectors because they offer the best chance for life-changing gains.
Alibaba is targeting a trend that is simply exploding. As noted earlier, mobile payments in China will rise to $47 trillion by 2021. That’s an increase of 422% in just six years.
But as incredible as it sounds, that growth understates what’s going on here. China’s mobile payments were worth just $15 billion in 2011, according to iResearch.
Tech Wealth Rule No. 4: Focus on Growth
Companies that have the strongest growth rates almost always offer the highest stock returns.
Over the past three years, Alibaba has grown sales an average of 38%. If that rate holds, they will double again in just two years. Even better, growth has recently quickened, notching a 58% gains in the most recent quarter.
Then again, this is a firm that keeps finding new routes for growth. It’s moved into messaging, news, social networking, and cloud hosting as well a music and video streaming.
Tech Wealth Rule No. 5: Target Stocks That Can Double Your Money
This is where we look at the firm’s earnings growth and see how long it will take the firm to double profits. By doing that, we can figure out how long on average it should take for the stock to give us triple-digit gains.
I’ve gone through the firm’s financial in detail and I’m projecting earnings per share will grow by an average 24% over the next three years. Bear in mind, this is a conservative approach. It’s based on the three-year track record and ignores the fact that earnings have recently climbed by 48%.
Now we use what I call my Doubling Calculator. Divide the compound growth rate of 24 into the number 72. We find that it should take just over three years for Alibaba to give us 100% gains.
Even if you invested a few hundred dollars now, imagine what you’ll end up with in just a few years. Then imagine what you could pile up if you hold onto Alibaba for 10… 20… 30 years.
Then imagine what you could do with it – and suddenly that Catalina 425 doesn’t seem so out of reach.
The stock is trading around $170, giving it a $436.01 billion market cap. Alibaba is up 102% so far this year, meaning it crushed the S&P 500 by more than ninefold.
But don’t let that scare you off this winner. With so much growth ahead, this is a quality stock with plenty of room to run.
It’s one that will give you plenty of room to imagine…
Have a great weekend.