Most of my recent posts have been a bit on the boring side- (closed end funds and solid blue chip companies) so I thought I would write about a more speculative China stock today, similar to my SSRX post of a few months ago.
Xinyuan Real Estate (NYSE:XIN) is a residential real estate developer that focuses on building large scale quality residential projects for the middle class. It typically builds multi-layer apartment buildings together with auxiliary services and amenities, such as retail outlets, leisure and health facilities, kindergartens and schools.
Here are some of the reasons I like XIN as a longer term investment:
- The stock seems pretty cheap. The forward PE ratio is only five times earnings. The 5 year PEG ratio is only 0.12, but this is only based on one analyst.
- The upcoming Expo 2010 Worlds Fair in Shanghai should be bullish for China stocks in general, and should help companies like XIN. I was fortunate to attend the 1964 NY World Fair as a child and it left a lasting impression on me. I checked the returns of the Dow Jones Averages for 1963 and 1964:
- 1963: +17%
- 1964: +14.6% (not bad)
- Many China stocks are coming off a sharp correction early this year and may be poised for another bull run heading into the 2008 Olympic Games followed by the Shanghai World's Fair in 2010.
- The recent earthquake in China has created more of a need for real estate construction companies.
- XIN reported strong growth in the first quarter and will be reporting its second quarter results on June 3. I expect the stock to do well heading into the earnings announcement.
Full Disclosure: I have a small starter position in XIN and plan to add more shares on price dips.