Capture China's Baby Boom With These Stock Ideas

A few months ago I found out that my wife is pregnant with our 1st child. Many well-wishers have said that a baby born next year will have extra luck because it is the year of the Golden Pig in China. From growing up eating General Gau’s chicken and fortune cookies [both of which do not exist in China] on mysterious place mats lined with gold lettering telling my fortune, I always knew that China had 12 Zodiac signs.

What I did not know was that every 60 years is a Golden Pig Year – the very best year that a baby can be born. Simon and Garfunkel’s lyrics “Born at the Right Time” immediately popped into my head until I thought of the last generation of Golden Pigs in China. By my calculations, they would have been born in 1947 and reached the ripe age of 19 when the Cultural Revolution just started ravaging the country…

My happiness started to be replaced a bit with apprehension. Then I read news reports stating that Shanghai’s maternity wards have been 20% more packed this autumn with expectant mothers, as many couples have been trying to conceive with the hopes of getting a fat golden pig. My stomachaches became worse than my wife’s morning sickness as I fretted about the competition for my boy to get into the right schools. In a country of so many people, it is hard to rise above one’s peer group in a normal year – but with next year’s 20% increase!

Then I started to put my investor’s cap back on. With so many babies being born next year, there are going to be ways to make money for savvy investors. Sales revenue and profits for companies targeting children and mothers will go up. I figure if I can take advantage of the investment cycle now, I’ll have enough money for my baby to buy his way into school.

Although not yet born, my baby is turning out to help me pick up on trends so that we can invest better. I am already a proud Father!

Here are some of the stocks of companies that might see a sales increase next year because of China’s baby boom.

Health and Safety Conscious Parents

As I have written before, Chinese Baby Boomers are increasingly concerned about health. That attention on health transfers to how they raise their own children. They are buying vitamins like Wyeth’s (WYE) Centrum vitamin brand and eating healthier.

Worried about having babies with strong bones, mothers are drinking consuming more yogurt from companies like Danone (DA) and snacking on calcium enriched cheese slices from Kraft (KFT). Heinz (HNZ) and Nestle (NSRGY.PK) offer fortified baby food and might benefit from the surge in parents buying healthier products for their babies. Johnson and Johnson’s (JNJ) baby oil and lotion is popular. With hectic work lives and more disposable income, more and more families are buying disposable diapers. Kimberly Clark’s (KMB) Huggies diaper line as well as P&G’s (PG) Pampers line are increasingly popular and stand to benefit.

Moreover, because of wild drivers on the roads of China and increasingly cheaper cars, many parents might buy their first compact car in order to take their babies around. Mid-priced car manufactures like Toyota (TM), Volkswagen (VLKAY), Ford (F), and GM (GM) might see an increase in their car sales as a result.

E-Commerce

More and more of mothers from China’s Baby Boomer generation are interested in buying their items online. I wrote about e-commerce in China but did not expect how much baby products are being sold online. Many of my wife’s friends told her to buy their products online from Yaolan.com because it is cheaper and more convenient for pregnant woman than waddling over to Wal-Mart (WMT) or Carrefour (CRERF) and fighting immense lines. Oddly enough, then, next year’s baby boom might just might be a jump start for e-commerce in China.

Credit card companies like Mastercard (MA) and American Express (AXP) are hoping for a turn of events.

Conclusions

Well, if executives at the companies I mentioned were smart, they’d clue in on the imminent baby boom in China and market their products accordingly. I know I am spending money on items that I never expected to – but I am going to spend what it takes to have my little Golden Pig make up for the previous batch.