7 Stocks to Play China's Advertising Boom

Tony Sagami

Did you enjoy the Super Bowl? I suppose that depends on whether you are a Green Bay Packers fan or a Pittsburgh Steelers fan. No matter who you rooted for, the Super Bowl was fun to watch for everyone.

The Super Bowl is usually the most-watched television event each year and keeps 80 million to 100 million Americans glued to their TV for four hours. However, millions of people who could care less about football tune in to the Super Bowl to watch the commercials.

The Super Bowl commercials are so widely watched that the cost of a 30-second ad has become extremely expensive, rising from $600,000 in the mid-1980s to $2.6 million today. It is that high price that makes it necessary for the advertisers to pull out all the stops and come up with spectacularly entertaining commercials.

Advertisers have spent a cumulative $1.6 BILLION on Super Bowl ads over the last 10 years, according to Kantar Media. That may sound like a lot of money, but it is just a drop in the overall advertising bucket. It is estimated that businesses spent more than $120 BILLON on advertising — TV, magazine, newspaper, online, radio — in the United States in 2010.

The reason for that ad spending is the United States is the largest consumer market in the world, and retailers want to grab as much of those consumer dollars as they can.

The World's Second-Largest Consumer Market

But guess what country is the second-largest consumer market in the world? Yup ... China!

Advertising spending is expected to nearly  double in the next three years.

One word can sum up the ad market in China — growth. Retail sales in China grew by an impressive 18.4% in 2010. Chinese advertisers spent roughly $33 billion on advertising in 2010, and that number is expected to nearly double by 2014.

The advertising business is growing so fast in China because of a dramatic increase in incomes that leaves more money for consumers to spend. Over the last 10 years, the average consumer's income has increased by 200%.

You don't have to ship your money to Shanghai or open an exotic international trading account to make money from this booming advertising business.

This may surprise you, but there are seven Chinese advertising stocks that are listed on either the New York Stock Exchange or the Nasdaq. Buying shares in any of them is as easy and as cheap as buying shares of Boeing or General Electric.

7 Chinese Advertising Stocks

AirMedia Group (AMCN) has a very profitable advertising niche for air travel. It has exclusive advertising rights at 38 Chinese airports including 26 out of the 30-largest airports in China. AMCN also controls the advertising in thousands of in-seat screens on many Chinese airlines, such as China Eastern.

The company has obtained exclusive rights until the end of 2014 to operate outdoor advertising platforms at Sinopec's 40,000 service stations throughout China.

Baidu.com (BIDU) is the Google of China and dominates the internet search business with an 80% market share. All those searches means a ton of online advertising revenues.

Baidu is already getting a bunch of China's advertising revenues, recently reporting an impressive 178% increase in Q4 profits.

If Darren Stevens of Bewitched worked in China, he would work for Charm Communications (CHRM). Charm is a traditional advertising agency. Charm offers a wide range of television advertising services from planning, designing, creating and managing advertising campaigns.

Most Americans don't have a high opinion on bus transportation, but buses are a popular mode of transportation in China. China MediaExpress (CCME) sells the ads for the bus benches and inside the buses themselves for most major cities.

Focus Media (FMCN) has a unique niche in China. It places digital screens in high-rise elevators. The digital screens are loaded with commercials and enjoy a captive audience for the two- or three-minute elevator ride.

Not only is China filled with commercial skyscrapers, everybody who lives in a major city lives in a high-rise condo. The number of elevators for Focus Media to advertise in is HUGE and GROWING.

VisionChina Media (VISN) is the dominant advertiser for the public transportation market. If you ride a subway or train in China, VisionChina Media is the company that probably placed the advertisements you see.

Chinese sports fans love Xinhua Sports & Entertainment (XSELD), the ESPN of China. It produces sports programming and sells the advertising for those programs. XSELD not only offers Chinese sports programming, it also brings foreign programming such as the NFL, Major League Baseball, NBA games, European soccer and the NHL.

The above is not a "buy" list. As always, you need to do your own homework and make sure that any stock you read about in this column is appropriate for your personal situation and goals.

The Chinese advertising business, however, is booming, and there are certainly a couple of BIG winners among these seven stocks.

P.S. If you want to add more Asian stocks to your portfolio, consider a subscription to my Asia Stock Alert for only $199 a year.

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Posted 02-11-2011 1:10 PM by Tony Sagami
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