Some of my Chinese stocks have been very good to me over the past couple of years. As China has grown faster than the rest of the world, companies that were in key industries have done very well, exhibiting the type of superior fundamentals that leads to superior performance.
I’m talking about Chinese stocks like Vipshop Holdings (VIPS), up more than 500% in the past year, and Bitauto Holdings (BITA), up almost 200% since we bought the stock back in September. I’m confident that in the years ahead we will find other Chinese stocks that have the strong revenue and profit growth that will earn high grades from Portfolio Grader and turn into winning investments.
But not all Chinese stocks are going to be a huge winner. Even though the Chinese economy continues to be pretty strong, some companies will always underperform the market. Just as you do here at home, you should always check Portfolio Grader to make sure you are buying a real growth stock and not just a China story that can have an unhappy ending. These two Chinese stocks may be hazardous to your portfolio.
Sina Holdings (SINA) is a Chinese company that sounds like a great story … at first. The company runs online media sites in a nation that is seeing an explosion of Internet usage. The company recently had some of its video and broadcasting licenses revoked by the Chinese government, a development that is hurting the stock right now. Sina also just posted its first negative earnings surprise in the last year and analysts are beginning to question the company’s future growth potential. The deteriorating fundamentals were picked up Portfolio Grader, which downgraded the stock to a “D” back in March — the stock is a “Sell” at the current price.
LightInTheBox Holdings (LITB) is another online Chinese company that is not living up to the optimistic expectations of investors. LightInTheBox sells apparel and fashion products, as well as more ggeneral products such as electronics and accessories. The company has not matched the anticipated growth rates for a retailer in a company with a growing middle class, posting three consecutive large negative earnings surprises. Unfortunately revenue growth is slowing and so far expenses are growing faster than the company is growing. The company is losing money and analysts are lowering their expectations for the rest of 2014. The stock debuted this month in Portfolio Grader with a grade of “F” — the stock is a “Strong Sell” right now.
There are some great Chinese companies, and we have seen fantastic profits from some of our Chinese stocks. However you need to be aware there are some not-so-great stocks as well. Use Portfolio Grader to make sure the numbers match the story — and avoid potential losing stocks.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth,Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.