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.
Next up is KongZhong ( KONG), which develops, markets and distributes consumer wireless services. KongZhong is currently trading at a huge discount and has been for some time. With a market cap of $200 million and total cash on the balance sheet of $120 million and no debt, Kong is trading at insanely low valuations. Back in September, the stock was up 80% in a single day. Other stocks that made the list are China Finance Online ( JRJC), which has $65 million in cash and zero debt, Aluminum Corp of China ( ACH) and Longtop Financial Technologies ( LFT). Check out these and more at the Chinese Rocket Stocks Part IV portfolio on Stockpickr.