Chinese Rocket Stocks Part III 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 NetEase ( NTES - Get Report), 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 Solarfun Power ( 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 ( ACH), PacificNet ( PACT), China Precision Steel ( CPSL) among others. To see more detailed analysis of the above picks and others, check out the Chinese Rocket Stocks Part III portfolio on Stockpickr.com.