Chinese stocks might be risky bets, but there’s a flipside to that.
Theoretically speaking, emerging market economies such as China grow at a much faster pace than developed nations until they reach maturity. As such, we can say that developing nations’ stock price growth exhibit excess return prospects because long-run stock valuations are primarily a function of GDP growth.
However, from a practical vantage point, Chinese stocks are volatile vehicles due to a host of political risks accompanied by a lack of regional transparency. Therefore, many Chinese stocks aren’t receiving their deserved traction as foreign investors remain divided on Chinese stocks’ risk-adjusted returns.
So, in a nutshell. Chinese stocks have high-risk premiums, but fortunately, I know how to gauge risk and dug deep to find seven Chinese stocks worth presenting to my readers!
|YQ||17 Education & Technology Group Inc.||$1.98|
17 Education & Technology Group (YQ)
It’s clear that YQ (NASDAQ:YQ) stock provides sharp action. The asset has risen by more than 50% since the turn of the year as de-listing fears have eased.
This is an excellent time to buy the stock as it’s trading at a 3.22x discount to its sales. Moreover, the 17 Education and Technology’s top-line growth is robust, conveyed by its first-quarter earnings report that revealed a revenue achievement of $36.82 million with a gross margin of 60.7%.
Chinese edu-tech stocks are a risky play. But, if I had to bet on one, I’d opt for YQ stock.
For those who aren’t aware, Agora (NASDAQ:API) provides a solution to independent applications’ video and voice needs with its integrated platform. It’s needless to say that the stock’s more than 90% drawdown since its IPO (initial public offering) shows that its initial investors lost a fair bit of money.
However, I’ve turned bullish on the stock considering Agora’s recent operating performance.
Here are a few operational highlights to consider:
- Agora has reached over 2700 customers.
- The firm has more than 439 000 registered applications.
- Its system is utilized by more than half of the globe’s top dating apps.
The factors above coalesced into a first-quarter revenue beat of $1.58 million, leaving the stock in a prime position to garner momentum.
China’s search engine giant, Baidu (NASDAQ:BIDU), is in great shape as it could be one of the primary beneficiaries of China’s planned $220 billion stimulus package. Furthermore, the company’s planning to offload its 53% in IQIYI, which will allow it to focus on its core operations while creating shareholder value.
BIDU stock is a secular growth play, illustrated by its 10-year CAGR of 22.50% and its sumptuous 97% regional market share.
Lastly, BIDU stock is undervalued on a normalized basis as its price-to-sales and price-to-earnings ratios are at 5-year discounts of 48.39% and 42.27%, respectively.
This is a definite buy in my books!
This company functions as a feeder to the bitcoin mining market, which is forecasted to grow at a CAGR (compound annual growth rate) of 28.5% until 2028.
Canaan (NASDAQ:CAN) is vertically integrated as its plays a hand in the entire bitcoin mining equipment value chain. The company’s operations span from research, design and sale of integrated circuits. Additionally, Canaan participates in the assembly and distribution of mining equipment and spare parts.
Based on its relative valuation metrics, CAN stock is undervalued. The asset’s trading at a 1.3x discount to its sales, and its price-to-earnings ratio outscores the sector median by 92.1%.
I’ve been bearish on NIO (NYSE:NIO) stock for most of the past year; however, the company has lost approximately half of its market value since I initiated my initial coverage, and its stock trades at a normalized price-to-sales discount of 56.19%. Moreover, I believe that many automotive investors in the U.S. and Eurozone might opt to invest in Chinese autos instead as regional inflation in China is more subdued.
Idiosyncrasies have also prompted me to change my call on NIO stock. For example, with Chinese production ramping up again, NIO’s June sales jumped by 60% year-over-year, causing the stock to sneak above its 50-, and 100-day moving averages.
BILI (NASDAQ:BILI) stock is a long-term play, and I mean that literally. The company’s virtual entertainment offerings align with an emerging consumer base as 86% of its consumers are aged 35 and below, allowing the firm to tap into a more digitally aligned consumer pool.
Furthermore, Bilibili’s shareholders recently approved the company’s proposal for a primary listing on the Hong Kong Stock Exchange, which could curb the effect of recurring NASDAQ de-listing discussions.
Lastly, at a price-to-sales ratio of 2.88x, BILI stock is trading at a multii-year discount.
Net Ease (NTES)
This stock is for those of you who are seeking exposure to the gaming industry. The firm holds a dominant position in the market and exhibits an illustrious 10-year CAGR of 27.87%, suggesting an exponential growth trajectory.
NetEase (NASDAQ:NTES) recently earned a nod of approval from Wall Street as Esme Pau of Macquarie opined: “NetEase is one of the best-in-class integrated gaming companies with a principal focus on game development and is the second-largest online game publisher by revenue in China,”
NTES stock is a long-term play. Nonetheless, it’s trading above its 10-, and 100-day moving averages, implying that a momentum pattern has formed.
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.