While U.S. investors focus on stocks here at home, it’s surprising how China’s even more chaotic stock market, especially with technology stocks, has gone under the radar.
“Amidst successive crackdowns on outspoken CEOs as well as harsh and targeted regulation of gaming and education sectors, stocks like Tencent (TCEHY) , Baidu (BIDU) - Get Baidu Inc. Report, JD.com (JD) - Get JD.com Inc. Report, and more of the country's tech stalwarts have erased years of gains,” said TheStreet’s Kevin Curran in Real Money.
“With the dovetailing of regulatory issues and an apparently weakening consumer in China, the stock has been among the hardest hit,” Curran said. “Accounting for a spending slump in China noted by the company in its Nov. 18 earnings call that sent shares spiraling, the stock has slid about 37% year to date.”
"Economic headwinds coupled [with] intensifying market competition also affected our core commerce business in China," Alibaba CEO Daniel Zhang told analysts in the call on Thursday.
Yet, despite this seeming avalanche of adverse news, not all are so bearish. In fact, many top investors are eyeing an appetizing opportunity as the dust settles on regulatory crackdowns.
Now, Curran said, it’s time for investors to be greedy when others are fearful.
“The quote attributed to Warren Buffett basically implores investors to keep a cool head and buy stocks when they are "on sale,” Curran noted. “In respect to Chinese stocks, this is certainly a tack taken by Buffett's Berkshire Hathaway (BRK.A) - Get Berkshire Hathaway Inc. Class A Report (BRK.B) - Get Berkshire Hathaway Inc. Class B Report partner Charlie Munger.”
Experienced China watchers agree.
"We still see large-cap Chinese technology companies as an opportunity for the next 10 years," Adam Coons, Portfolio Manager at Winthrop Capital Management told Real Money. "Most of these companies have sound business models, strong free cash flow, and are relatively inexpensive relative to U.S. tech firms."
He noted that the discount to U.S. firms is a major benefit, as continued growth in China is being discounted as compared to the soaring valuations in U.S. tech.
Overall, Chinese stocks are not likely to be on the radar of risk-averse investors.
“However, given the seemingly unending spate of bad news emanating from the market, a strong case can certainly be made for a contrarian buy-in on some of the nation's biggest tech names,” Curran said.