So, I have a stock for you, but first I want to explain what I do here at Cabot.

I write the Cabot China & Emerging Markets Report.  My investment universe includes every emerging market stock that trades on a U.S. exchange as an ADR (an American Depositary Receipt).  Sticking to ADRs is a risk-control measure, since it guarantees that the companies whose stocks are listed have met the reporting requirements of the major U.S. exchanges, including those pesky Sarbanes-Oxley standards that U.S. companies complain about (but that give investors in foreign companies so much comfort).

Cabot China & Emerging Markets Report used to focus only on China.  But the Chinese economic miracle, which shoved China through the transition from a rural-agrarian society into an urban-manufacturing one like a DVD on fast-forward, is being copied around the world as consuming nations seek out new sources of low-priced labor.

So we widened the focus to include the so-called BRIC stocks, those from Brazil, Russia, India and China.  (I was tempted to add Korea so I could spell BRICK correctly, but I suspected that Korea would be making the transition to developed nation status soon.)  These four countries had the capitalization, the infrastructure and the relative political stability to spawn some monster stock stories.

(The political stability part of the equation has gotten a little stickier in Russia in the past year or so, with the situation there, scaring many otherwise fearless investors worse than a letter from the IRS.)

The Report has made money in Chinese stocks, in Russian Stocks, in Brazilian stocks, even in the few Indian stocks that offer ADRs.

Of course emerging markets are more volatile than developed markets, which means that they go down faster than their developed-world counterparts when trouble is brewing and investors start scrambling for the comfort of cash and T-bills.

But they also go up faster than developed markets.  Check out these MSCI performance numbers from the end of March.  For the year that ended in March, the U.S. market dropped 38.4% of its value, the world fell 37.4%, the emerging markets scrubbed off 36.7% and China declined 35.0%.  The differences aren’t huge, but China and the emerging markets are clearly on top.

For the first three months of 2009, the world and the U.S. fell more than 10%, while China gained 1.3% and the emerging markets rose 4.1%.  Again, it’s advantage China/EM.

And for the month of March, the MSCI World Index shows a 6.4% gain, the MSCI U.S. Index has tacked on 8.5%, and the MSCI Emerging Markets Index is up an impressive 10.5%.  China, you ask?  It’s up a robust 14.4%!

The story looks clear to me: Equity performance was totally crappy in the last year, but improved around the world in the first quarter and took a real jump–especially in China–in the past month.  The emerging markets were the clear global leader in the first quarter and even outperformed the U.S. and the world for the year!

It seems to me that anyone who cares about making money in the stock market–I know, that’s so 2008–should have some emerging markets exposure.  As the wise race-track veteran said, “The race is not always to the swift, but that’s where the smart money is.”

But enough about me, how about an example of these Chinese opportunities I’ve been talking about?

My idea for today is E-House Holdings (EJ), a leader in the Chinese real-estate market.

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Chinese real estate experienced its own bubble in 2007-2008, with massive development in both the residential and commercial sectors and rapidly inflating prices.  With most housing sales in China still being made mostly in new housing to first-time buyers, E-House has been more of a marketing agency for newly completed developments than a real-estate agency as we think of it in the U.S.  The bursting of the Chinese bubble has left a huge backlog of housing on the market, and there won’t be much price movement until demand can chew its way through that inventory.

But E-House is holding its own today, and when the market returns to a normal balance of supply and demand, the company’s wholly owned exclusive housing and commercial real estate database will become a vital (and marketable) tool for all agents.  It’s as if E-House had exclusive rights to the Multiple Listing Service in the U.S.

EJ has been through a horrendous dive, falling from its high of 36 in late 2007 to a low of 4 last November.  Since then, it has fought its way back to 8, then spent three months building a new base between 6 and 8.  It has broken above 8 on good volume and should put in a little time under 10 to recharge its batteries.  It looks good to me.