China Southern Airlines (ZNH): Three quarters of steady revenue growth 

By Paul Goodwin, Analyst and Editor of Cabot China & Emerging Markets Report

From Cabot Wealth Advisory, 11/18/10. Sign up for free Cabot Wealth Advisory e-newsletter

My stock pick for today is China Southern Airlines (ZNH), which is the dominant passenger, cargo and mail carrier for the southern provinces of China. Airlines are traditionally tough ways to make a profit, but the Chinese government’s control of rate structures, routes and operating rules takes a little of the uncertainty out of the equation for China Southern.

The company’s major appeal is its last three quarters of steady revenue growth (31% in Q1, 52% in Q2 and 48% in Q3) and the huge earnings growth that can come seemingly out of nowhere, such as the 816% jump in Q3 earnings.

This isn’t a stock for the faint of heart, or for those who like to invest and forget about it for months at a time. ZNH has a beta of 1.46, and the chart shows some big volatility. But the chart also shows a stock that put in a nice base from April through the end of August, then broke out above 26 on good volume in September. The stock soared to 39 in late October before the correction set in. Note that volume is minuscule, which guarantees high volatility.  It’s that low volume that pulls the stock out of consideration for inclusion in the Cabot China & Emerging Markets Report’s portfolio.

But with a P/E ratio of just 7, annual sales or more than twice its market cap and a generous float of 66 million shares, ZNH can provide a good opportunity for a trader with the patience to sharpshoot it near the 50-day moving average.

For more on top Chinese (and other emerging markets stock), check out Cabot China & Emerging Markets Report, the #1 newsletter for the last five years, according to Hulbert Financial Digest.




Paul GoodwinPaul Goodwin


Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report

A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years eding 10/31/10 with a 22.2% annual return.