Asian stocks are continuing their tear as global growth is now back in the forefront of investors' minds. Unfortunately, though, many investors remain hesitant about putting money into Chinese stocks.
Market bubbles, China's government and corruption issues keep many folks worried. Even so, these companies, which are spinning off a ton of cash and sporting excellent balance sheets and great growth prospects, also have a solid of wall of worry built in.
In recent times, China has been much stricter in regard to internal corruption, and it remains under pressure to open its markets to freer trade.
That's why, in an effort to continue our earlier work, I set up a new list on Stockpickr: the
portfolio. (Check below for links to the earlier Chinese Rocket Stocks portfolios.)
In this edition, I re-examine a few small-cap Internet plays as well as a few plays on gambling and solar energy.
First up is
, an online gaming company that provides content and services in several languages through its online games. Since there are 12 official dialects and countless other tongues spoken in mainland China, NetEase's business model makes sense.
With $400 million in net cash, a $2.2 billion market cap and $200 million in cash flow, NetEase is trading at only 9 times cash flow. One interesting statistic is that NetEase has beaten analyst expectations in each of the past four quarters. If it beats again in 2008 (and all indications are it will, as the gaming sector has beaten up), then NetEase will have a forward
price-to-earnings ratio (P/E) of 13 or lower, trailing even the lowest companies in that space.
Next on the list is
( SOLF), a solar-cell manufacturer that came public almost eight months ago. Shares quickly hit $17 as demand for Chinese solar stocks went through the roof. A few months back, Solarfun reported a horrible quarter, sending shares down as much as 25% in a single day. This, though, in hindsight was a great buying opportunity, as Solarfun now has more than $100 million in cash on its balance sheet.
Last week, Solarfun announced that it has secured three multiyear framework commitments, which should consistently drive earnings for some time. It also announced that it signed its first non-domestic, long-term supply agreement (which starts in 2008). Outside businesses are starting to notice Solarfun, and so should investors.
I also like
Aluminum Corp. of China
China Precision Steel
among others. To see more detailed analysis of the above picks and others, check out the
portfolio on Stockpickr.com.
- In July, I compiled the first Chinese Rocket Stocks. Here's the column and the portfolio.
- In August, I compiled Chinese Rocket Stocks Part II. Here's the column and the portfolio.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider PacificNet to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
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