There is a heated debate going on about China’s ghost towns, the risk implications of which are substantial for investors.
Resource and infrastructure-building companies that rely on construction in China will be hurt if unoccupied cities stall urbanization. But perhaps it’s not as bad as it seems: Yale professor Stephen Roach thinks that China is okay. He cites urbanization surpassing over 50% for the first time in 2011, successes in urbanizing empty cities in the past, and China’s central planning to explain why there are ghost towns in China. He concludes that these ghost towns are “an essential ingredient of the “next China,”” because it “provides China with both cyclical and structural options.”
On the other side of the debate is Vitaliy Katsenelson, a perma-bear of China, who is skeptical about China’s true debt-to-GDP ratio. The size of the asset-bubble in China depends on the unknown amount of debt in the system. Katsenelson says that “the more debt infesting the system, the further and steeper asset price declines will be and the longer and more painful recovery will be.”
Business Section: Investing Ideas
Investors exposed to resources, precious metals, construction, and infrastructure companies need to monitor China’s slowing growth. A regular monitoring the price of copper, coal, and steel will also help manage related risk exposure to these sectors.
Below are some company favorites that warrant your attention.
Attractive companies in the resource sector that are underperforming due to a slowdown in China and Europe are:
1. Cliffs Natural Resources Inc. (CLF, Earnings, Analysts, Financials): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap at $5.25B, most recent closing price at $36.84. The company is committed to its dividend, which pays 6.79%. Shares are being punished due to its exposure to China’s demand for copper.
2. Freeport-McMoRan Copper & Gold Inc. (FCX, Earnings, Analysts, Financials): Engages in the exploration, mining, and production of mineral resources. Market cap at $33.77B, most recent closing price at $35.58.
3. Potash Corp. of Saskatchewan, Inc (POT, Earnings, Analysts, Financials): Produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. Market cap at $35.14B, most recent closing price at $40.90.
4. Joy Global, Inc. (JOY, Earnings, Analysts, Financials): A manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. Market cap at $5.76B, most recent closing price at $54.43.
5. Vale S.A. (VALE, Earnings, Analysts, Financials): Engages in the exploration, production, and sale of basic metals in Brazil. Market cap at $82.92B, most recent closing price at $16.10.
In the energy sector:
6. Peabody Energy Corp. (BTU, Earnings, Analysts, Financials): Engages in the exploration, mining, and production of coal. Market cap at $5.97B, most recent closing price at $22.26.
7. Walter Energy, Inc. (WLT, Earnings, Analysts, Financials): Produces and exports metallurgical coal for the steel industry primarily in the United States. Market cap at $2.11B, most recent closing price at $33.69.
More favorable plays in the energy sector are:
8. Talisman Energy Inc. (TLM, Earnings, Analysts, Financials): Engages in the exploration, development, production, transportation, and marketing of crude oil, natural gas, and natural gas liquids. Market cap at $14.54B, most recent closing price at $14.09.
9. BP plc (BP, Earnings, Analysts, Financials): Provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products. Market cap at $133.16B, most recent closing price at $41.97.
10. Transocean Ltd. (RIG, Earnings, Analysts, Financials): Provides offshore contract drilling services for oil and gas wells worldwide. Market cap at $17.35B, most recent closing price at $48.27.
To view more related companies, open the “Company Snapshot,” click “Analyze” and then select “Related Finder.”
To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard. Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed at the Kapitall store.
Use Kapitall’s Tools: Looking for ways to analyze this list?
Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall’s tab navigation to browse through the data…
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Cliffs Natural Resources Inc. (CLF, Chart, Download SEC Filings)
- Freeport-McMoRan Copper & Gold Inc. (FCX, Chart, Download SEC Filings)
- Potash Corp. of Saskatchewan, Inc (POT, Chart, Download SEC Filings)
- Joy Global, Inc. (JOY, Chart, Download SEC Filings)
- Vale S.A. (VALE, Chart, Download SEC Filings)
- Peabody Energy Corp. (BTU, Chart, Download SEC Filings)
- Walter Energy, Inc. (WLT, Chart, Download SEC Filings)
- Talisman Energy Inc. (TLM, Chart, Download SEC Filings)
- BP plc (BP, Chart, Download SEC Filings)
- Transocean Ltd. (RIG, Chart, Download SEC Filings)
New to Kapitall?
1. New to the site? Click here to register for a free account, and gain access to more tools and data
2. Looking for more investing ideas like this? Click here to sign up for your free copy of Kapitall Weekly
3. Follow us on SeekingAlpha, Motley Fool, Nasdaq and Twitter
ABOUT KAPITALL WIRE
Kapitall Wire, which is not a broker/dealer, offers free cutting edge investing ideas, lively commentary and timely analysis of companies enhanced by interactive tools. And the Investing 101 section breaks complex concepts down to their basics, offering education to novices that doubles as a refresher course for more seasoned investors.
Kapitall Wire is a division of Kapitall Inc. Securities products and services are offered by Kapitall Generation, LLC, member FINRA/SIPC . Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.
