Share prices prove Chinese stocks are hotter than hot right now. So, what’s the deal? Is this a good time to get invested in quality Chinese companies? If so, which companies are the quality ones you should be looking to buy right now? These are the questions I’ll be answering in today’s blog.
The folks at Bespoke recently issued a report revealing the S&P China ETF (GXC) is up 37.8% year-to-date, while the Nasdaq 100 ETF (QQQ) is up only 22.2%. Now, that’s a pretty significant difference in performance. So, I think we all have to agree that, yes, this is a dynamite time to get invested in the right Chinese stocks.
Why? Well, in addition to these two ETFs, the major Chinese technology copmpanies–JD.com (JD), Baidu (BIDU), Alibaba (BABA) and Tencent (TCEHY)–are up an incredible 71.3% year-to-date, while the major U.S. technology companies (or FANG stocks)–Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Alphabet (GOOGL)–are only up 36.6%. There are a few reasons for this.
First off, let’s look at Baidu, the company many investors consider China’s version of Google. Baidu is expecting revenue between $3.4 billion and $3.5 billion in the third quarter alone. This represents 26.7% to 30.1% annual sales growth. In addition, analysts are forecasting 56.7% earnings per share growth, and estimates were revised $0.28 higher just last week. You can see that Wall Street is gearing up for spectacular earnings from this one Chinese Internet company alone.
Moreover, JD.com, the second-largest ecommerce platform in China, reported earnings on Monday. Second-quarter revenue soared 43.6% year-over-year to RMB93.2 million, or $13.7 billion, while earnings per ADS jumped 52.3% year-over-year to RMB0.67, or $0.10. The analyst community was only looking for earnings of $0.08 per share on $13.3 billion in sales. So, JD.com posted a 25% earnings surprise and a slight sales surprise. What’s more, the company is expecting revenue this year between RMB81.8 billion and RMB84.2 billion, which represents 36% to 40% annual sales growth. Overall, this made for a solid earnings report.
But those are only two of the Chinese companies currently receiving A-ratings in my Portfolio Grader tool.
My Ultimate Growth members have been watching this same fundamental strength play out in all 10 Chinese stocks on our Buy List. In fact, our Chinese stocks are up an average 54% since we added them, led by triple-digit gains in Baozun, Inc. (BZUN) and Weibo (WB).
Tomorrow, we’ll take a closer look at America’s FANG stocks, and decide for ourselves if they’re competing at the same level as these Chinese companies we’ve been talking about today. So, I urge you to tune into this blog again tomorrow to discover all the answers to your investing questions.