by Jim Woods | September 25, 2013 2:08 pm
When you’re visiting an unfamiliar country on vacation — especially one where you don’t speak the language or are unfamiliar with the customs — it often helps to seek the advice of a tour guide or someone with in-depth knowledge of the local scene.
Similarly, when investing in a foreign country, it can be very helpful to consult a stock-picking guide to help you make the most money.
China is one country that’s unfamiliar to most U.S. investors, at least in terms of the language, customs, attitudes and market opportunities, as they tend to be far different than they are here at home. That’s why hiring a stock picker familiar with China might just be your best bet for fire-breathing China profits.
So, where can you find these China stock pickers? Well, the best are usually hired by mutual fund companies with funds focused on getting market-beating returns in the top-performing China-based stocks.
With that in mind, here are five outstanding Chinese mutual funds you should consider.
The Columbia Greater China Fund (NGCAX) is designed to seek long-term capital appreciation, and invests at least 80% of its net assets in stocks of companies whose principal business activities are in the Greater China region. That region includes Hong Kong, Taiwan and The People’s Republic of China.
Over the past 12 months (as of Aug. 31), NGCAX has delivered a 17.2% gain for investors. Top holdings in the fund include online gaming giant Tencent Holdings (TCEHY), energy behemoth CNOOC (CEO) and telecom stalwart China Mobile (CHL).
Columbia Greater China Fund has an expense ratio of 1.53%, which I think is a modest price to pay for the stock-picking expertise you get with this fund.
Dividends aren’t usually the first thing that comes to mind when investing in China, but perhaps they should be.
As its name suggests, Matthews China Dividend Fund (MCDFX) is designed to deliver current income, and it does so by investing in dividend-paying stocks of companies located in China. The fund also invests in convertible debt along with equity securities to help generate income and total return.
Through the end of August, the 12-month return was an outstanding 18.9%. Top holdings in MCDFX include automaker Dongfeng Motor Group (DNFGY), real estate firm Guangdong Investment Ltd. (GGDVY) and beverage maker Yantai Changyu Pioneer Wine Co.
Plus, you get this collection of dividend payers at an expense ratio of just 1.50%.
Invesco China Fund (AACFX) invests in companies based in, and primarily operating in Mainland China, Hong Kong and the island nation of Macau.
The fund is dominated by financial holdings, a sector that makes up the biggest single group at over 30%. The top three holdings in AACFX are all banks, including China Construction Bank Corp. (CICHY), Industrial and Commercial Bank of China (IDCBY) and Bank of China Beijing (BACHF).
The combined holdings in AACFX have delivered investors a 21.7% gain over the past 12 months (again, through the end of August), all at an expense ration of just 1.80%.
Stalwart fund family Fidelity is no slouch when it comes to China-focused mutual funds. The company’s Fidelity Advisor China Region Fund (FHKAX) invests in companies from the Mainland China, Hong Kong and Taiwan.
By design, FHKAX invests up to 35% of total assets in any industry that accounts for more than 20% of the Hong Kong, Taiwanese and Chinese market. That means it bets big on the biggest firms in a given sector. Managers use a combination of fundamental analysis particular to a given sector, as well as broad market conditions, to make their stock selections.
Top holdings in this one include chipmaker Taiwan Semiconductor (TSM), investment holding company AIA Group (AAGIY) and China Construction Bank Corp. (CICHY).
Performance of FHKAX has been outstanding, with a 27.2% 12-month return through Aug. 31. That stellar performance comes with at a very low expense ratio of 1.29% as well.
Oberweis China Opportunities (OBCHX) is hands-down the best performer on the list of fire-breathing China funds, delivering a scorching 51.8% gain over the past 12 months through August’s end.
Oberweis has done this with a big allocation to the technology sector of more than 37%. Top individual holdings include semiconductor firm Spreadtrum Communications (SPRD), gaming concern Galaxy Entertainment Group (GXYEY) and Chinese Internet search giant Qihoo 360 (QIHU).
The expense ratio on this fund also is the highest in the group at 2.15%, but I can live with that. The huge gains Oberweis has posted proves it can deliver for investors who want to take a trip to China with their money — and that want to do so with a knowledgeable financial tour guide at their side.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.
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