Where to invest in 2018? TENCENT (TCEHY) and WEIBO (WB)

Several people have asked me where would I deploy money at this moment. The answer is China/Asia.
Why China? Because they have 1.38 billion people and they just lifted their one child only policy to now two. There was once a fear that China would slow down due to their shrinking population. Now, it doesn’t seem to be the case anymore. More importantly, the Chinese companies are growing more rapidly. More specifically there are some POE (Privately Run Enterprises) are doing exceptionally well and are global leaders. I think that coupled with lots of fear over Chinese politics and overheated markets and a less compelling growth outlook has made China "unattractive." But this is probably the time to buy.

Interesting factoid: China has 102 cities that have a population of 1 million people or more. The US has 10. China has 10 cities that are +10 million people. US has ZERO. Crazy right?

China has 10 cities that have +10 million people.

China has an economy that is shifting from the traditional manufacturing to consumer oriented. China has four cities that are in the top 15 most expensive to live in the world (Hong Kong, Shanghai, Beijing, and Shenzhen). New York was the only city that made the top 15.

But where to invest in China? What sectors? Answer: In the China E-Commerce space. China has become a online shopping society as well as gaming.

Here are my two stock picks. Note I'm a long term buy and hold kind of guy (so my time frame is +5 years)

Stock recommendation #1: Tencent Holdings (US ticker, via OTC is TCEHY) current price is $55.7. Target price, hard to say but short term +7% higher. Long term, I don’t know. Their earnings are amazing.

Tencent is like a little of various types of firms. Think Facebook has Whatsapp ~ Tencent has WeChat.
They own 10% stake in Spotify. Tencent has the largest PC gaming platform in China and the world. It owns 100% of RIOT games (League of Legends) and 84% of Supercell (Clash of Clans, Boom Beach, Clash Royale) …They have #1 position in all China in various role playing games and 1.38 billion users. Advertisement dollars are insane. WeChat has closed in on Whatsapp and Messenger’s number of users at 1 billion. Tencent became Asia’s first $500 billion company by market cap. But most importantly, Tencent has become a buyer of companies that are startups (think Berkshire Hathaway but for tech firms in Asia). It has investments in Tencent is the world's fifth-largest internet company by revenue. Tencent's current cash flow growth of 39.28% tops the "Internet - Services" industry's average 7.83% growth rate.

Top largest Tech firms in the world by revenue.

Stock recommendation #2: WEIBO (US ticker, via OTC is WB)- Current price is $120. Target price $260.

Weibo is the equivalent of Facebook and Twitter combined. They have the largest microblogging platform in China. Earnings continue to surprise on the upside. Advertisment dollars and government protection from Facebook and Twitter from entering China gives Weibo a huge moat of protection.
Weibo currently has 376 million monthly users. This user base has grown by 15 million in each of the previous two quarters, representing an annual increase in users of around 18%. Even if rumors that Facebook will enter China in 2018 prove true, Weibo will enjoy a substantial head start.
The company’s minuscule market cap compared to Facebook’s also shows the growth potential of WB stock. Weibo’s current market cap stands at around $22 billion. Facebook, with about six times as many users, has more than 23 times the market cap ($510 billion). WB would have to rise by fourfold to match Facebook’s market cap per user.

Just my "ten" cents.

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” - Warren Buffett

Follow me @epan35