Cabot's China Editor Goodwin Names Top Picks for 2011

Cabot China & Emerging Markets Report Editor Paul Goodwin's outlook and top picks for 2011 were featured on MSN Money in "Top Pros' Top Stocks for 2011." Columnist Michael Brush asked leading investment newsletter authors to name the top stocks, Goodwin named two, both recent Chinese IPOs.

Excerpt from MSN Money
Top pros' top stocks for 2011
By Michael Brush, MSN Money 12/21/10

What's in store for stocks in 2011? Each year around this time, I ask that question of the people whose advice a lot of savvy investors find worth paying for: stock newsletter writers who distinguish themselves by their records.

The pros I talked to this year generally have bullish outlooks, expecting solid gains for stocks of 8%-10% and 3% economic growth for 2011.

But there are also several bears, who foresee some combination of high inflation, a weak dollar and modest stock performance, as the economy gets dragged down by a sluggish housing market and concerns about excessive government spending and stimulus. Out of the 10 stock newsletter writers below, six are bullish, three are bearish, and one predicts minimal gains in stocks in 2011 at best.

If you're a bull like me, however, the negative sentiment is encouraging. Any good stock market rally needs the proverbial "wall of worry" to climb. Put another way, if everyone started out bullish, who'd be left to buy our stocks and drive them higher.

I've always relied on newsletter writers with solid long-term records, as ranked by Hulbert Financial Digest—the industry's standard…

Cabot China & Emerging Markets Report

The strategy: Editor Paul Goodwin hunts for aggressive growth stocks that trade for more than $10 a share, because that means institutional money managers can buy them and drive them higher. Cabot China & Emerging Markets Report ranks third for five-year performance on Hulbert's list, with 21.6% annualized gains during that time.

The big picture: Goodwin believes overall global economic growth will be strong in 2011, with China's economy expanding by 9%. But U.S. growth will remain sluggish until employment picks up, which may not happen next year. He thinks stocks are due for a correction of at least 5% to 10%, following the recent robust rally and the sharp increase in investor bullishness, which often precedes a pullback.

Two favorite picks: Goodwin likes two recent Chinese initial public offerings that trade as American Depositary Receipts (ADRs), a type of listing in the U.S. for foreign companies. One is E-Commerce China Dangdang (DANG), a Chinese online retailer. He suggests waiting for a pullback to the low-$20 range to buy. The other is Youku (YOKU), a YouTube imitator that's in good graces with the Chinese government—important, for business at least, in a country that keeps such a close eye on Internet content. He suggests waiting for a pullback closer to the mid-$20 range on this one.

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