4 Stocks That Will Go Up Because of the 60-Mile Traffic Jam in China

by: James Altucher
China just made world history with the first 60 mile traffic jam. Cars were moving 1 mile an hour for over ten days. I don't even want to think of the bathroom logistics on this one. So let's think of more important things: how can we make some money off this event?

The first stock that came to mind is eLONG, the Chinese online travel company. Clearly, people have to start thinking more about air travel when the thought of a multi-day or even month long traffic jam could be looming around any turn. Additionally, with booming middle class growth (50 million new middle class citizens a year), there should be a natural bump up in travel demand.
I've written about this stock before and still like it for a number of the same reasons:
  • Expedia (NASDAQ:EXPE) has been steadily buying shares. It now owns a big chunk of the company. My guess is eventually it will buy the entire company and it is simply trying to buy stock on the cheap right now.
  • Great balance sheet with $130 million in cash and no debt.
  • Quarterly Revenue is growing at a 45% year over year rate.
  • It's interesting to compare LONG’s use of search engine optimization compared with competitor, Ctrip (NASDAQ:CTRP). Searching on “Shanghai hotel reservation” on China Google results in this page. You don’t need to read Chinese to see that eLong shows up higher on the search results than its bigger competitor. Location is everything on Google (NASDAQ:GOOG) and the higher you are, the more sales you get.
Online bookings continue to ramp up and should see a continued bump due to the media's coverage of the 60 mile traffic jam.
China XD Plastics (NASDAQ:CXDC)
The next stock that could benefit from the traffic jam play is CXDC. This is one I have also written about recently. CXDC is the largest domestic supplier of plastics to the car industry in China. The company has a forward P/E of just 7 despite 90% revenue growth and over 200% earnings growth over the past year. McKinsey estimates that China's car market will grow 10-fold between now and 2030. This will drive growth to every parts supplier in the industry.
Now we will undoubtedly be hearing from the environmental groups regarding this traffic jam and the resulting pollution from it. They will point out the exhaust and the need for limits on car pollution especially considering the Chinese auto growth. The electric car crowd will look to gain steam here, especially since the Chinese government has been making a big push towards electric vehicles.

Kandi Technologies (NASDAQ:KNDI)
This is why I'm very interested in electronic car company Kandi Technologies (KNDI). China has promised consumer incentives in the form of tax credits they can use towards the purchase of electric vehicles. With 60 mile car jams, clearly pollution is going to be an issue. Any company in the electric car space is going to benefit. KNDI is a stock I'm looking at purchasing that makes all electronic mini-cars, all-terrain vehicles and other all-electric cars. Last year they experienced 100% growth and has several of its development projects being subsidized by the Chinese government. Last quarter the company got approval from the government to sell its electric vehicles. Annualizing last quarter's EPS of 6 cents and assuming some growth now that the approvals are in place, the company is probably trading at about 10 times annualized earnings or less despite the 100% growth in revenues.
Of course, anytime you hear about a traffic jam that may last a month, infrastructure could be an issue. The Chinese government has made a big commitment to spending on infrastructure for the next few years and this will be reinforced by this traffic jam. Now many sectors may benefit, ranging from the obvious: cement, steel and iron to the not so obvious.

Fushi Copperweld (NASDAQ:FSIN)
One such play that I've been following for quite some time is Fushi Copperweld (FSIN). The company develops, designs, manufactures, markets, and distributes bimetallic wire products, principally copper-clad aluminum (CCA) and copper-clad steel (CCS), mainly to the auto, telecom and utility markets.
As all this infrastructure is built out, Fushi is well positioned to be a major player in helping to build out the corresponding cable and telephone lines. The company trades for just 5x forward earnings and has $2/share in cash and virtually no debt, while boasting 40%+ quarterly revenue growth year over year.

Of course, while you are stuck in the car, your kids might be playing mobile games via NetEase (NASDAQ:NTES) and SINA so those could be two minor plays here.
Traffic jams are awful. Nobody wants to get stuck in one, let alone a 60 mile traffic jam. But since this particular traffic jam is on the other side of the world we might as well figure out how to make money from it.

Disclosure: Long CXDC, long NTES, long SINA, and I could go long the others after this article is published.

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