Local investors continue to flood into China's stock market, Tim Seymour, managing partner of Triogem Asset Management, said Friday. When coupled with lower interest rates and the ability for foreign investors to participate in the market, it's not surprising the rally there has been so strong.
The best play on China is Alibaba (BABA) , according to Pete Najarian, co-founder of optionmonster.com and trademonster.com. The company's international expansion will fuel long-term growth.
Don't forget about Baidu (BIDU) , said Guy Adami, managing director of stockmonster.com. The stock has been trading well, the company reported strong earnings and the growth remains impressive, he added.
Investors looking for a less direct play on China but who still want exposure to the region should consider buying Las Vegas Stands (LVS) . Steve Grasso, director of institutional sales at Stuart Frankel, said the stock has traded poorly but may be near a bottom.
"I don't think it's in bubble territory," Adrian Mowat, chief emerging market and Asian equity strategist at J.P. Morgan, said about Chinese equities. The market is only about one-third as high as its previous peak in 2007. Chinese investors used to invest so much into real estate and now some of those funds are finally flowing to stocks, he explained. His top concern is the Chinese government's growth targets are too high.
The financial sector hit a new 52-week high on Friday. Najarian was enthusiastic about the bank stocks, saying he is long Goldman Sachs (GS) and Bank of America (BAC) but expects the whole sector to continue rallying. Grasso added that Bank of America has a much stronger balance sheet than in the past. The stock is undervalued as long as there aren't any large litigation settlements looming in the near future.
Financial stocks are moving higher because short-term Treasury rates are climbing. Those rates are being boosted by the better-than-expected labor report, Seymour explained. Morgan Stanley (MS) has "a lot more runway ahead of it," Adami added.
Friday's big analyst call revolved around Bank of America/Merrill Lynch's downgrade of Google (GOOGL) and upgrade of Yahoo! (YHOO) . Jim Cramer, the co-manager of the Action Alerts PLUS portfolio, also discussed the rating changes on CNBC's "Cramer's Mad Dash" segment.
Google lacks near-term catalysts, whereas Yahoo! does not, Najarian said. He prefers Yahoo! for its stake in Alibaba and potential to generate a tax-free return on that investment.
Seymour acknowledged that Yahoo! has near-term catalysts but argued Google is the more attractive buy. The stock has a low valuation, strong revenue growth and is near the bottom of its trading range. Grasso added that Google has a better risk-to-reward opportunity than Yahoo!.
-- Written by Bret Kenwell