A Buying Opportunity: Chinese Stocks Worth A Look

Chinese stocks listed on the Shanghai Composite Index (SCI) are down over seven percent this year, and unless things change, it will be the third year since 2010 that the index moves lower.

These are clearly not the best of times for Chinese stocks, but that doesn’t mean there is not a buying opportunity out there for some Chinese stocks trading on U.S. exchanges.

For instance, just the other day, I discussed the added benefits from small-cap stocks and talked about China-based Phoenix New Media Limited (FENG). This stock has had a nice run up this year, surging 129%, including a 14% pop on Monday. While situations like FENG are not the norm with Chinese small-cap stocks this year or in the recent few years, they are also not as rare as you might think.

In the Chinese education space, TAL Education Group (XRS) has been one of many Chinese education plays that have sizzled on the charts this year—up 34%.

In China’s often talked about real estate sector, where some have been calling for a bubble to materialize for years now, there have been some excellent Chinese stocks. One of these companies, Xinyuan Real Estate Co., Ltd. (XIN), which I highlighted here in February is up over 70% since.

In the social media space, a stock that looks interesting on the chart is Renren Inc. (NASDAQ/RENN), which is appearing to be forming a bullish cup and handle and could break higher.

Another China-based business to consumer e-commerce play that looks interesting is E-Commerce China Dangdang Inc. (DANG).

The stocks I have mentioned are only a few of the numerous China plays that can return big if you have the stomach for the volatility and risk.

The key is the financial numbers that are presented by the companies. I hope that these numbers can be trusted to risk our capital in these stocks.

While there are those who still believe Chinese stocks are not worth a look and the best days are behind them, I’m not one of them and continue to firmly believe there will be excellent buying opportunities for speculators in Chinese stocks. You just need to be careful and stay away from companies that do not have a decent history of financials. Also look at the governance, as many of these stocks will need to be audited by auditors approved by the SEC.

So instead of running for the exits when you see Chinese stocks, you may want to take a closer look.

Disclaimer: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. The opinions in this e-newsletter are just that, opinions of the authors. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose.

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