By Paul Goodwin, Analyst and Editor of Cabot China & Emerging Market Report
From Cabot Wealth Advisory, 9/24/09 Sign up for free Cabot Wealth Advisory e-newsletter
Every investment choice is a compromise. Either you accept high risks in the hope of high gains, or you dial back your expectations and accept relatively small returns in exchange for increased safety.
I don't think there are any exceptions to this rule. None. And if there were, I'm betting that the SEC would probably want to have a nice, long chat with whoever found it.
So my idea for today's stock is a bit of a compromise. It isn't the hottest Chinese stock on the market. But neither is it a boring Red Chip stock that you have to hold for years to get a good return.
The company is Mindray Medical (MR), which surely has one of the best company names ever. This Chinese manufacturer of medical devices started out in 1991, making knock-offs of ultrasound and other medical imaging machines. It took 10 years, but the company concentrated on R&D, and kept finding small, patentable improvements to existing technologies.
It used to be that the only markets for Mindray's machines were the smaller regional and local hospitals and clinics around China. But the gradual improvements in both quality control and design coupled with inexpensive Chinese labor soon made the company's devices attractive to international customers.
Today, China accounts for just 43% of Mindray's revenue, with the U.S. contributing 16%, and 41% coming from the rest of the world.
Patient monitoring and life support systems are the biggest product line, bringing in nearly half of the company's sales. Imaging systems and in-vitro diagnostic products each contribute about a quarter.
Mindray is a great example of a well-run company that has raised itself out of the low-quality, low end of the medical device market. By spending the money to create intellectual capital, the company has broadened its market. Q2 results showed a gain of 10% in both revenues and earnings, and the recovering global economy will likely bring back the much bigger gains that characterized 2007 and 2008.
The chart for MR shows an attractive six-week base at 31 and signs of a breakout in recent days.
Editor's Note: Cabot China & Emerging Markets Report is your best source of advice when it comes to investing in Chinese stocks. In fact, Cabot China & Emerging Markets Report was the top performer of all investment advisory newsletters for the past five years according to Hulbert Financial Digest. If you'd like to own the top-performing Chinese stocks as they rocket ahead in the next bull market, I strong recommend that you join them. To get started with a no-risk trial subscription, simply click here. Information on Introductory Subscription to Cabot China & Emerging Markets Report.
Paul Goodwin
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of
Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.