Good China Stocks Undervalued

BEIJING (TheStreet.com) -- In just the past two weeks, the Shanghai Composite has retreated as much as 20% after skyrocketing 80% since its November lows.

As a result, many U.S. investors have been selling off U.S.-listed China stocks even where U.S. listed valuations are extremely attractive.

While the overall Shanghai index continues to trade at an average P/E in the mid 20s, there are still a number of U.S- listed China stocks which trade on P/E's of less than 5, despite rock solid fundamentals. And yet some investors continue to sell anything with "China" in the business description. In some cases this presents a unique buying opportunity.

In the depths of the U.S. market bottom in March 2009, there were several underfollowed cash-rich China gems that were trading at a discount to cash per share, despite having no debt, a growing, high-margin revenue stream and being consistently profitable. This type of trading reflects illogical panic, and it is in no way surprising that these stocks have rebounded by several hundred percent in the following months.

The bad news is that you probably missed those trades. The good news is that there are more stocks that fit a similar profile, trading at attractive valuations. Even better, for investors who think the market is due for any level of meaningful correction, true "give-away" valuations could be back on different stocks. But keep in mind, valuations like this often only last for a matter of days, so they are stocks which need to be monitored closely on the watch list.