Why I Won’t Be Deterred from Great Buys in China

I’d never have expected to say this, but: Ever since March, some of the most exciting opportunities I’ve been finding are Chinese stocks. Prior to that, I’d been primarily U.S. for a good, long while. But when my Portfolio Grader scans started picking up “Strong Buys” in China, I jumped on them. And the results have been extremely gratifying.

But sadly, a lot of people are being scared away from Chinese investments. Folks like Jim Cramer have been talking on CNBC about how all these Chinese stocks are going to get delisted because of their accounting – and I can’t tell you how irresponsible that was.

Maybe those who haven’t done their homework are afraid of being hit by this wave of delistings. But I subject EVERY stock to the strict criteria programmed into my Portfolio Grader – and if it doesn’t measure up, it doesn’t get a second look from me, anyway.

So, I just want you to know that when I recommend a Chinese stock, I go through all the financials by hand and make sure they all comply with U.S. accounting rules. So, I am confident that these companies are not going to be delisted.

I think Jim Cramer was anticipating what the Trump administration was going to do, but they have no plans in motion to delist Chinese stocks. Or maybe he was just having a bad day! But the bottom line is, if you comply with our U.S. accounting standards, you’re going to be fine. A lot of the Chinese stocks I recommend have complied for a long, long time, and I’ve never had an incident with a Chinese stock where I was worried about the accounting.

How have I been so lucky, given the fate of investors in companies like “the Starbucks of China,” Luckin Coffee? That’s a great question…and, again, luck has nothing to do with it. There’s a clear way to find the well-established companies.

As I always advise readers here in Market360 or my other investing newsletters, you want to start by targeting the American Depositary Receipts (ADRs). These are foreign companies that have U.S. banks vouching for them and auditing their numbers.

In other words, these companies have a history of transparency. To make it onto our exchanges in the first place as an ADR, they have to release their quarterly results and file annual reports – just like any other company. (And that’s what this Senate bill, the “Holding Foreign Companies Accountable Act,” is written to do.)

So, I’m still very comfortable and happy with the top-rated Chinese ADRs I recommend, like Vipshop Holdings (VIPS), which I’ve written about to you before.

Vipshop Holdings is an internet retailer in China, where the economy grew at a 3.2% annual pace in the second quarter after contracting 6.8% in the first quarter. As you know, China is one of the first economies to rebound from the coronavirus pandemic. The world is closely monitoring how fast it recovers in order to determine the path that the rest of the world could take.

And Vipshop’s sales are supposed to be up 4.1%. Their earnings are supposed to be up a whopping 768.2%! The analysts have revised their estimates 55% higher in the past three months. These are the basic hallmarks of a Strong Buy, and overall, VIPS currently rates a “B” for its Fundamental Grade and an “A” for its Quantitative Grade in my Portfolio Grader.

That’s not to say that every Chinese stock is worth your money; far from it. And the same is true of every country and every industry in the world. But I always put my faith in the numbers. And what the numbers are telling me is that there are some great buys here right now.

At Accelerated Profits, where I update subscribers every Monday, my latest Weekly Profit Guide identified three particularly Strong Buys on our list. One is a Taiwanese company involved in 5G and the Internet of Things (IoT), and it’s delivering earnings in the high double-digits, beating estimates, and announcing better forecasts than expected, too.

Whether it’s China, Taiwan, Israel, the EU, or right here in the United States, I’m always on the lookout for Accelerated Profits – where our next buy (or sell) alert could hit at any time.

I’ve been finding great buys every week since the market turned a corner on March 24. And many of the stocks have delivered a year’s worth of profits already! I expect you won’t want to miss out, so click here for a free briefing on our current initiative, the Accelerated Income Project.

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