There have been some concerns on Wall Street the past few weeks about the Chinese economy. The latest sign was a decline in the Purchasing Managers Index, which came in below the consensus expectation and made the markets nervous Chinese stocks.
However the weakness just makes it that much more likely that the Chinese government will add stimulus programs to get the economy back in gear. The Chinese government is targeting a 7.5% growth rate this year and earlier this month said they will increase spending on things like construction spending and other programs designed to get growth back on track.
This will be great news for our Chinese stocks. We hold several high quality China-related stocks that are still exhibiting best of the best fundamentals. I am willing to add to these positions on any weakness as they still have very strong sales and earnings growth and the analysts are increasing their estimates for these powerful companies.
Let’s take a look at these winners:
SouFun Holdings Limited (SFUN) is a great example of a best in class Chinese stocks that I am excited about right now. The company operates a real estate internet portal that serves real estate developers in the marketing phase of new property developments, as well as to real estate agencies. They also allow companies that make housing related products like home furnishing and improvement products as well as companies selling consumer products like furniture and electronics.
Earnings are up over 80% this year and sales on fire rising by about 50%. SFUN has posted four consecutive earnings surprises and analysts recently raised their estimates for 2014 and 2015 profits. Portfolio Grader raised the company to a strong buy back in July and this stock is still a strong buy at the current price.
Education is a top priority in China and competition for the best schools are intense. TAL Education Group (XRS) benefits form the focus on education by offering tutoring services for kids in grades k-12. They operate a network of 270 learning centers and 247 service centers in China and also have 5 call centers in Beijing, Shanghai, Tianjin, Guangzhou, and Shenzhen.
XRS also operates eduu.com, an online education platform that serves as a gateway to its online courses on topic such as college entrance examinations, high school entrance examinations, mathematics, English and Chinese composition. The high level of interest in education is powering strong earnings growth with profits up over 38% this year and in the most recent quarter the bottom line was up 66% year over year.
The company has posted a positive earning surprise the past four quarters in a row and Portfolio Grader has ranked the stock an A since last August. XRS shares remain a strong buy today as the fundamentals just keep getting better.
Qihoo 360 Technology Co. Ltd (QIHU) is a stock I have mentioned a few times in the past few weeks. The company provides Internet and mobile security products in the People’s Republic of China and is growing a very high rate. In the most recent quarter this company had sales growth of over 100% and earnings surged by more than 200% year over year. They are now the undisputed leader in smart phone security in China with over 70% market share.
Analysts have recently raised their r2014 and 2015 profit estimates after three consecutive big positive earning surprises in a row. Portfolio Grader upgraded this stock to an A back in June and the stock remains a strong buy today.
Even though there may be a few fists and starts along the way China will be one of the fastest growing companies in the world for the foreseeable future. Furthermore the government is committed to growing the economy at a high rate as it expands its role in the world and develops a thriving middle class. This is great news for those Chinese companies that have the very best fundamentals as identified by Portfolio Grader.