Earlier this summer, I broke down what’s happening in China right now — and why some concerns about the Asian nation’s market were overblown.

It was the dead of summer, the market seemed to be taking a turn for the worst and the financial news outlets grabbed onto the China bubble story and ran with it. With our own stock market bubble still fresh on investors’ minds, many were opting to “play it safe” and avoid Chinese stocks altogether.

However, investors who sold China, I told you, may have made a huge mistake.

This is an idea that is again gaining traction in the media. Only a few months after the “sell China” crowd ’s protests echoed on every news station, “Maybe we shouldn’t ignore this opportunity” has become the new slogan.

It all began when China approached an important new milestone: Last month, it passed Japan to became the second largest economy in the world. Now, coupled with the resurgence of domestic stocks, it seems that the world is a bit more bullish on China’s prospects.

Hedge fund manager and author James Altucher succinctly argued China’s case in a recent New York Post article. One of his arguments perfectly sums up the powerful growth pattern China is displaying:

• 50 million people per year are being added to the middle class. The Chinese middle class has gone from 5% of the country to 25%. This is a huge demographic tidal wave that has ramifications in almost every industry, both in China and in the U.S.

• To ignore this tidal wave is to ignore stocks that will be multiplying their revenues and profits by tenfold over the next several years. Chinese auto, luxury, travel and gaming stocks will all benefit.

It’s difficult for us to state the ramifications of this economic shift. Fifty million people — that’s one-sixth of the entire U.S. population — making the move to a new economic class with money in their pockets is nothing short of a surge the likes of which the world has not yet seen.

Of course, countless businesses will benefit from the influx of new customers. (And we’ve found one penny play company in particular that will help the newly monied citizens of China spend their hard-earned cash.)

Selling to the New Traveling Class

Naturally, a variety of businesses will compete for the disposable income of the new middle class. Altucher mentions autos and travel as two prime sectors that will see a portion of this new money. Today, I want to focus on travel, and one virtually unknown company that you will get to know very well should you ever find yourself in a major Chinese airport…

But before I get into specifics, let’s take a quick look at the growth of air travel in China.

As it turns out, the growth is exactly what you would expect. Passengers are surging. In fact, China Southern Airlines now has the third-largest passenger count of any airline in the world, flying a total of 66.28 million people in 2009, according to World Air Transport Statistics by the International Air Travel Association. For context, China Southern was fourth in 2008, according to China Daily. Another Chinese airline, China Eastern, also eked onto the IATA list, at No. 9.

With air passengers shattering records, we looked for a stock that would benefit from the growing number of passengers — both domestic and foreign — passing through China’s major airports every day.

What we found was an emerging advertising firm that specializes in digital TV ads in airports across China. Now, this growing company is looking to expand its operations — and advance down the road to profitability.

The company operates big-screen digital ads — specifically, the “digital billboards” you see in some upscale shopping malls and other locations. Unlike its competition, however, the company I’m telling you about controls its ad space in 25 of the 30 largest airports in China.

In addition to this digital ad space, the company also sells ads on eight airlines — including China’s three largest carriers. The firm is also beginning to branch outside of airport advertising, having recently signed an exclusive agreement to operate outdoor advertising at service stations across the entire country of China.

I think that you’ll be hearing more about this company in major publication in no time…

[Ed. Note: Unfortunately, Greg can’t give away the name of this infantile company to such a broad audience like the Sleuth’s. However, he’s not going to tease you with it. There is still a way for him to give you the name of this little company, along with his advice for how to make it work for you. Just click here to learn more immediately…]

Sincerely,
Greg Guenthner
Penny Sleuth

August 20, 2010

Greg Guenthner

Greg Guenthner heads up Agora Financial’s small-cap division and is the founder of one of the only independent OTC research advisories in the industry. A graduate of George Mason University, Guenthner joined Agora in 2005 after several years as a journalist. He is managing editor of Penny Stock Fortunes and Bulletin Board Elite.

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