Resident Crisis & Opportunity guru, Christian DeHaemer came across some opportunities in India that he wanted to share with you. Enjoy.
Indian Road Building Boom
The last time I was in India, was the first time I’ve seen the time honored method of third-world, road construction. This generally features a seventy-pound woman in a dirty sarong making gravel by hand – one swing of a sludge hammer at a time.
The innovative Indians make speed bumps out of hand-packed scoops of concrete left to dry on the pavement. Needless to say, when you couple bad roads with the fact you must dodge cows and people – a forty-five mile drive takes hours.
That is all changing. The Indian government has begun a 5-year, $500 billion project to widen and pave some 40,000 miles of narrow, decrepit national highways.
When President Eisenhower returned from the war in Germany, he brought back an admiration of the famed Autobahn. And he set forth to build a interstate highway system to rival the Nazi’s. This transportation network not fostered trade and commerce, but also created the suburban culture and a golden age of automobiles.
India has been growing at around 7 percent a year for the past decade. Last year GDP came in at 6.9%. India is fighting to keep pace with its rival China and hopes that new roads, trains, and bridges will continue its growth.
According to Businessweek, “India plans to increase investment in infrastructure from 5% GDP to 9% GDP by 2012, which it calculates as a target of $500bn investment in infrastructure over the next five years.”
One company to keep an eye on is Tata Motors (TTM:NYSE)
Tata Motors makes and sells passenger cars including the least expensive car in the world, the $2000 Nano. The company also recently purchased the venerable British brands, Range Rover and Jaguar. Though the Indians in general hate the British, they love their brands.
Tata also has a large market share in commercial trucks and tractor-trailers, a segment that will benefit the most from decent roads.
And in fact, Tata Motors is up more than 400% off the crisis lows of last year. It’s had quite a run, but it might be a nice buy on a pullback near $10.
The bigger picture is in construction companies and oil. India is just one of the emerging markets that is rapidly selling and driving cars. More cars are sold in China now than anywhere else. Brazil is having a record year in car sales with a jump of more than 6% in January alone.
I’ve found one Chinese electric car company that thinks it will be larger than Toyota in 15 years.
I’ve found another highly leveraged way to play the boom in Brazilian auto markets which I just gave to my Crisis and Opportunity readers yesterday. The bonus is that it pays a 10% dividend.
But perhaps the best way to play the move in emerging markets to middle class car ownership is good old oil. I’ve found what I believe to be the most undervalued oil company in the world. My readers are already up 62% in five weeks. But the real catalyst for share price appreciation will come in April. You don’t want to miss this one.
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Crisis and Opportunity