"The Chinese consume seven times as much pork as the United States, or about a fifth of a pound a day for every person," notes Tony Sagami.
In The Asia Stock Alert he says, "The best way to profit from the Chinese love affair with pork is to invest in Zhongpin Inc. (NASDAQ: HOGS), China's version of American food giant Tyson."
"Zhongpin is a U.S. publicly traded meat and food processing company that specializes in pork and pork products in China. It offers 270 different products, including chilled pork, frozen pork, pig by-products and other prepared meats as well as fruits and vegetables.
"Don’t let that diversified product line fool you, though. Zhongpin is all about pork — and it’s my #1 oick to profit from the growing Chinese appetite for the 'other white meat.'
"The Chinese are quickly becoming more affluent. In 2004, China’s gross domestic product per capita averaged just $1,000. By 2007, it had more than doubled to $2,200. What’s the first thing you would buy if your income went from subsistence to middle class? A Mercedes? A Rolex?
"Probably not; those are mainly one-time-only purchases. Instead, I think most people would look to upgrade something they use/have often — and that would be their quality of food.
"Indeed, Chinese rising income is having a dramatic affect on their dietary habits. The middle class is no longer content to eat bowls of rice and cabbage with an occasional pig knuckle or chicken foot as a treat. They want fruit, candy, dairy products ... and particularly meat.
"Since 1980, per-capita meat consumption in China has nearly tripled; and according to the USDA, Chinese pork consumption rose 22% between 2002 and 2006.
"The wealthier a nation becomes, the more meat products they consume. And as the Chinese economy continues to boom, you can expect its citizens to eat more and more pork from Zhongpin.
"The Chinese government is very committed to the long-term policy goal of self-sufficiency of food supplies, especially for pork.
"Agricultural companies are especially favored by the Chinese government and its not-so-subtle support (Strategic Pork Reserves) of this industry practically guarantees Zhongpin’s future.
"By the way, Zhongpin was awarded 'China Top Brand' for its fresh pork and prepared pork products by the Chinese government last September.
"Zhongpin has only been trading on the NYSE for 3 1/2 years, but it has been growing like a weed. Sales have increased from $74 million in 2005 to $291 million last year. That’s almost a 400% increase in just three years.
"Rapidly growing businesses typically trade for very high multiples, but Zhongpin is priced at only 8.5 times 2008 earnings and just 0.9 times sales. That’s dirt cheap for such a rapidly growing company.
"But get this: Zhongpin has a PEG (price earnings-to-growth) ratio of 0.17. That’s peanuts! Any PEG ratio lower than 1.0 means that you’re getting a ton of profit growth bang for your investment buck.
"Look at it this way: Zhongpin is growing more than five times faster than the market values it at! The pork business isn’t rocket science, but it has some of the strongest fundamentals of any business model you’ll find."
