3 Chinese Stocks That Will Be Better Than Alibaba

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Are you excited about Chinese e-commerce giant Alibaba (BABA) and its coming IPO?

alibaba ipo baba stockIf you aren’t, then you’re likely in a very small minority. Indeed, the Alibaba IPO will almost certainly be the biggest initial public offering ever, and just about everyone is going to want a piece of the BABA stock pie. At a top-end valuation estimate near $250 billion, the Alibaba IPO likely will be a defining event signifying the rising dominance of China, and its new lead role in global wealth creation.

Now, in case you weren’t yet aware, Alibaba basically is a combination of e-commerce giant Amazon.com (AMZN) and retail behemoth Walmart (WMT). In other words, just about anything a consumer wants can be purchased at Alibaba, and usually at an attractive price point.

Yet for all of the hype about the size of the Alibaba IPO, which now looks like it will price after Labor Day, there are other Chinese stocks that are anything but hype. In fact, I think several Chinese stocks out there will be better than BABA stock, as they represent companies that already have proven themselves to be big winners and have the underlying businesses and financials to keep rewarding shareholders.

Here are three Chinese stocks I like better than BABA.

Chinese Stocks to Buy #1 – China Mobile (CHL)

BABA stock chinese stocks China Mobile CHLOne of China’s biggest blue-chip companies is wireless mega-carrier China Mobile (CHL).

By far the largest telecom company in the world, China Mobile has a total market share of more than 62% — a level that trounces second-place China Unicom (CHU) at a market share of approximately 23%. And when you consider there are currently 1.2 billion total wireless subscribers in China, it doesn’t take long to figure out why CHL is an established winner with much less to prove than Alibaba and BABA stock.

Although China Mobile’s massive subscriber base keeps its top line humming, CHL has had some issues of late with the cost of handset subsidies. In fact, the increasing cost of subsidies has pressured China Mobile’s bottom line, but that might be coming to an end soon.

According to a May report in the Chinese media, wireless providers in the country now are planning to reduce handset subsidies on smartphones in an effort to improve profitability. Lower handset subsidies will allow China Mobile to boost its bottom line, and that should drive the stock higher.

Chinese Stocks to Buy #2 – Vipshop Holdings (VIPS)

Chinese stocks BABA stock VIPshop.comNew middle- and upper-class Chinese citizens love to shop. Hey, if you had some significant expendable income for the first time in your life, you would be into shopping too.

Moreover, those consumers have demonstrated a penchant for buying via online flash sales, and the company making this possible is Vipshop Holdings (VIPS).

Vipshop’s success can be seen in the company’s impressive Q1 metrics. Vipshop reported a year-over-year sales surge of 126% to $701.9 million during the quarter — a number that trounced expectations for revenue of just $658.9 million. The company also expects to see big growth in the coming quarter, saying it expects revenue over the next three months to be between $780 million and $790 million.

The Q1 earnings release in May caused several Wall Street firms — including Deutsche Bank, Brean Capital and Goldman Sachs — to up their respective ratings on the shares. Those upgrades aren’t very courageous, however, especially considering VIPS stock has nearly doubled over the past six months.

Chinese Stocks to Buy #3 – Tencent Holdings

Chinese stocks BABA stock Tencent TCEHY 185Mobile e-commerce firm Tencent Holdings (TCEHY) provides online and mobile software services that include the über-popular WeChat and QQ Mobile messaging platforms.

Tencent has demonstrated its ability to monetize mobile apps, as evidenced by its Q1 revenue spike of nearly 300% — and that increase was just from the previous quarter. Tencent’s financial prowess has translated into a big gain of more than 88% during the past 12 months, but new developments on the WeChat front could translate into an even bigger bounce for TCHEY.

I recently wrote about Tencent’s plan to supercharge revenues by creating an online advertising platform for WeChat. This new service, still in the beta stage, allows WeChat account holders to pay user fees to place ads on other companies’ official pages. If successful, the new WeChat ad platform will be another gold mine for the shares, and that is likely to keep both the top- and bottom-line metrics roaring well beyond any Alibaba IPO bounce.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/07/3-chinese-stocks-alibaba-ipo-baba-stock/.

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