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TheStreet Open House

Chinese Rocket Stocks Part IV

It is certainly exciting to watch a stock like Baidu (BIDU) trade every day. The volatility is wild; the stock regularly moves 5% to 7% in either direction on a given day, which makes it great to trade.

However, for the individual investor, Baidu is much tougher to handle. Sure, its year-over-year growth is more than 100%, but it also trades at roughly at 65 times earnings.

Liquidity seems to be flowing back into Chinese stocks, sending a select group higher. Last week, shares of Fuwei Films (FFHL) surged some 100% on no fundamental news.

What has confused me about Chinese stocks is why, in general, there seems to be a divergence in valuations between these and U.S. stocks. Lots of China-based stocks have tons of cash on their balance sheet and hardly any debt.

So, in an effort to catch the next rally in this sector, I set up the Chinese Rocket Stocks Part IV portfolio on Stockpickr.

I tried to focus on stocks that have good balance sheets, strong growth and potential for a huge rally.

Here are two of the stocks I found.

First is Asialnfo Holdings (ASIA). This stock fits all the criteria and more. Asialnfo provides telecom software solutions and IT security products and services. Basically, its main business comes from its firewall and virtual-private networking security for small and medium-sized companies. The company has $160 million in cash, zero debt and quarterly earnings growth of more than 200% year over year.

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