Fuqi International (FUQI)
By Paul Goodwin , Analyst and Editor of Cabot China & Emerging Market Report
From Cabot Wealth Advisory, 5/21/09 Sign up for free Cabot Wealth Advisory e-newsletter
My investing idea today is a jewelry company, which isn't the sector that usually springs to mind when growth investing is mentioned. But Fuqi International (pronounced Foo-chee) is a Chinese jewelry manufacturer that's catering to an enormous appetite for gold among China's increasingly affluent people.
In many countries, China and India among them, gold jewelry isn't just an adornment, it's a way to accumulate wealth and pass it along to future generations. Long experience has taught many people that necklaces around your neck and bracelets on your wrists are more portable and more reliable than volatile currencies and fragile banks. So, as personal income rises, so does the amount of money heading into gold jewelry.
Fuqi International (FUQI) has grown from a $15 million a year business in 2002 to sales of $399 million in 2008. And in some ways, the layoffs and hard times in China have only reinforced the need for tangible commodities that can be used when a rainy day arrives.
Fuqi runs everything—management, marketing, design, sales and manufacturing—from one 53,000-square-foot building, bringing out 300 new designs a month and selling through its 30 provincial distributors and 700 direct sales agents.
Sales in 2008 were up 153% from 2007, and earnings continue to rise. A quarterly report that showed a 45% jump in earnings on a 41% gain in sales gave FUQI a lift on May 15, shooting it from 6 to 11 in just a few days. The stock has now corrected to just under 10, and looks very healthy.
Shakespeare may be right that "all that glisters is not gold," but gold is doing quite well for Fuqi International.
Note: Paul Goodwin is the editor of Cabot China & Emerging Markets Report, the top performing newsletter for five years, according to Hulbert Financial Digest. If you'd like to follow some emerging markets stocks that are making good on their potential, you should consider a no-risk trial subscription to the report. Information on Introductory Subscription to Cabot China & Emerging Markets Report.
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