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Milk has never had a large presence in China, but that's changing very, very fast these days, which has meant great profits for dairy companies like American Dairy (ADY). Despite the name, this company manufactures and distributes powdered milk, formula, soybean products, and walnut products in China. With their growing prosperity, Chinese consumers, with the encouragement of their government, are increasingly interested in these products.

Given these trends, and the enormous number of potential customers, there's a huge upside potential for a company like ADY. Even more encouraging, the numbers show the company is already taking advantage of the situation. Net income tripled from 2003 to 2004, then nearly doubled from 2004 to 2005. So far 2006 looks like it continued that growth, with net income for the first six months of 2006 up nearly 84% over the same six months in 2005. Ian Wyatt, editor of The Growth Report, also identified the stock as his top conservative play in Steven Halpern's Top Pick's Report: 2007.

So far, most American investors don't know about this company, and you can still get in early. In late December, the management of ADY announced that it would be making a push in America in 2007; as more investors become familiar with its great results and even greater potential, we could see this stock price really climb in 2007.

Type of stock: A dairy and soy company in China, one of the potentially largest dairy markets in the world.

Price target: ADY is currently at the very top of its 52-week range, but I wouldn't be scared off. I think we're going to see significant growth in 2007, followed by steady growth for years to come. I see this stock going to $30 in the next three months---the company is doing a road show in the United States in the coming weeks. So, get in now. Also, the big potential is if ADY "lists" its stock on the Shanghai exchange.

ADY 1-yr chart
ADY 1-yr chart

Source: The Outlook For American Dairy: Get Milk