There Are Better Chinese Equities Than JD.com Stock

I wouldn't buy JD stock after JD.com's CEO was accused of improper conduct

By Will Ashworth, InvestorPlace Contributor

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Bad Optics Are Creating an Opportunity in JD.com Stock

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While JD.com (NASDAQ:JD) CEO and founder Richard Liu maintains his innocence, the mere allegation of improper conduct against him has put a significant cloud over JD stock.

Down 20% since the allegations against Liu were first made public on Sept. 5, JD stock price had fallen 32% in the eight months before the charges were made.

Although innocent until proven guilty is the foundation of our democracy, it’s also true that a fish rots from the head down. The mere suspicion that Richard Liu forced himself on a young woman suggests that JD.com’s corporate culture encourages this sort of behavior.

I, for one, can’t and won’t support a company whose CEO is accused of these types of actions, and consequently I won’t buy JD stock anytime soon. I can’t imagine why any investor would want to own JD stock in the wake of these allegations.

Until these accusations are proven to be baseless and Liu’s name is cleared, there are plenty of other Chinese stocks that investors should buy instead.

Here are three I’d consider buying instead of JD stock.

Alibaba

When it comes to Chinese stocks, you can’t get much bigger than Alibaba (NYSE:BABA), a company whose founder I’ve admired for some time.

It’s been several months since I’ve written about the house that Jack Ma built. Its recent second-quarter earnings report suggests that its business is still strong despite the headwinds facing Chinese companies at the moment.

After its Q2 revenues increased 54% year over year to $12.4 billion and its earnings rose 14% to $1.40 per share, 17 cents above analyst expectations, Alibaba stock appears very cheap at the moment.

When it comes to bottom fishing a good approach is to stick to the market leaders, and BABA stock certainly fits the bill. Consider that during the latest quarter [Q1 2019] the revenues jumped by 61%,” InvestorPlace contributor Tom Taulli wrote in an article published on Nov. 1. “… even if the growth rate somehow was cut in half (which seems unlikely) BABA stock would still represent a good value,” he added.

In my opinion, Taulli is right. Alibaba is a smarter alternative than JD stock at the moment.

Weibo

Like all Chinese stocks, Weibo (NASDAQ:WB) stock has had a bad year, as it had tumbled 37% in 2018 as of November 6.

Last November, I wrote that Weibo was one of seven stocks that could double your money over the next 12 months. That didn’t happen. However, over the past three years, it’s still managed to deliver an annualized total return of 54% to shareholders.

In September, InvestorPlace contributor Chris Lau suggested that Weibo had plenty of growth ahead, arguing that a company whose revenues are growing as fast as the social media platform should not be trading at less than 18 times its forward earnings.

Caught between the Chinese crackdown on content and the trade war with the U.S., Weibo stock is an inexpensive way to play the Chinese market.

Noah Holdings

I first recommended Noah Holdings (NYSE:NOAH), a Shanghai-based wealth management firm specializing in serving high-net-worth investors, in June 2013.

I liked the idea of investing in a company that was benefiting from China’s booming economy and the government’s loosening of investment rules. However, the company’s decision to focus on recurring service fees instead of one-time commissions was what really caught my attention.

In September, I recommended NOAH stock, writing that its 27% drop over the previous three months made it a very attractive buy. Since then it’s gone sideways.

However, with the company’s online brokerage and education businesses experiencing rapid growth, NOAH stock won’t be kept down for much longer. 

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/11/there-are-better-chinese-equities-than-jd-com-stock/.

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