The Shanghai Stock Exchange Composite Index (the “SSEC”) – the “Dow Industrials of China” – has been stuck in a bear market for almost five years.
But Chinese stocks are one of the best-looking trade setups right now.
Take a look at this chart of the SSEC…
While the S&P 500 has gained 165% over the last five years, Chinese investors have lost 40%.
Remember, though… all markets eventually turn. Bulls turn into bears, and bears become bulls.
The bull has been running a long time in the United States. It's starting to look a little tired, and it may be time to hand the baton over to another market with fresher legs.
After resting for five years, it's tough to find a “fresher” bull than China's.
If you can believe the financial statements, many Chinese stocks are trading at single-digit price-to-earnings ratios and at good discounts to book value.
Their balance sheets are flush with cash. And it's easy to find Chinese stocks that pay dividends greater than 4%. Chinese stocks are cheap.
Fundamentally, you won't find a better setup anywhere else on the globe.
6 Chinese Stocks to Buy
PetroChina (PTR) – 4.1% dividend yield
PetroChina, China's only super major, has a history of strong financial growth and is well positioned to take advantage of China's growing demand for diversified energy sources.
Currently trading at only 9.3x earnings, the PTR stock looks like the rare gem that offers growth at a value price.
China Life Insurance (CFO) – 1.7% dividend yield
The company has posted truly impressive growth rates as of late; revenues have surged from just over 166 billion yuan in 2008 to 371 billion yuan over the trailing twelve months while net income before taxes has almost doubled in the same time frame.
Soufun Holdings Limited (SFUN) – 3% dividend yield
Soufun operates a real estate internet portal that serves real estate developers in the marketing phase of new property developments, as well as to real estate agencies.
They also allow companies that make housing related products like home furnishing and improvement products as well as companies selling consumer products like furniture and electronics.
Earnings are up over 80% this year and sales on fire rising by about 50%. SFUN has posted four consecutive earnings surprises and analysts recently raised their estimates for 2014 and 2015 profits.
Tal Education Group (XRS)
TAL Education Group benefits form the focus on education by offering tutoring services for kids in grades k-12. They operate a network of 270 learning centers and 247 service centers in China and also have 5 call centers in Beijing, Shanghai, Tianjin, Guangzhou, and Shenzhen.
XRS also operates eduu.com, an online education platform that serves as a gateway to its online courses on topic such as college entrance examinations, high school entrance examinations, mathematics, English and Chinese composition.
The high level of interest in education is powering strong earnings growth with profits up over 38% this year and in the most recent quarter the bottom line was up 66% year over year.
Qihoo 360 Technology Co. Ltd (QIHU)
The company provides Internet and mobile security products in the People’s Republic of China and is growing a very high rate.
In the most recent quarter this company had sales growth of over 100% and earnings surged by more than 200% year over year.
They are now the undisputed leader in smart phone security in China with over 70% market share.
China Mobile Limited (CHL) – 4.2% dividend yield
China Mobile's trends seem to be going in the correct direction. Revenue per share and book value per share have increased steadily and consistently over the past 10 years.
At the same time, the free cash flow per share has increased, giving management more money to invest in the business or return to shareholders.
The dividend has increased more than 6 fold in the past 10 years, from $0.31 in 2003 to $2.01 last year.