Most experts agree that the future of making money lies with China. As the population there grows and as more and more of its citizens enter the middle class, there is a great opportunity here to make money. The question becomes, how do you go about investing in China?
If you own any international allocated mutual fund or exchange traded fund, chances are you have some exposure to China. And if you own any large cap mutual fund or exchange traded fund, you likely have exposure there as well seeing as more and more U.S. companies do business in China.
But what if you want more exposure investing in China? How exactly would you go about doing it? Luckily, you can invest in China companies through the stock market. But just like with the US stock market, not all stocks are worth investing in.
So in today’s post, I am going to walk you through 3 great stocks for those investors who want to invest in China.
3 Great Stocks When Investing In China
#1. Ctrip International (NASDAQ: CTRP)
Ctrip International is a one stop travel booking site for the Chinese market. Like travel booking sites in the US, Ctrip is the online destination for booking air travel and hotels. But Ctrip wants to do more than this. They are entering into booking bus and train trips as well as group travel tours.
And recently, the company is moving its business offline. Ctrip has teamed up with travel agents to begin booking travel for those consumers who are wary of the internet.
When the company recently reported earnings, earnings per share came in at $0.22 beating estimates by $0.02. Revenues beat by $8 million, coming in at $951 million. This was an increase of 44%.
The biggest issue with Ctrip has been the high price to earnings of its stock. But with the recent pullback, now is a great time to jump on board this travel stock.
#2. New Oriental Education And Technology Group (NYSE: EDU)
New Oriental Education And Technology Group is an education play in the Chinese market. If you remember, I recently talked about Tal Education Group. The reason I like New Oriental is because they offer the same thing and more when compared to Tal.
In addition to tutoring and test prep, New Oriental Education also runs private schools and offers courses for professional certification.
Its no secret Chinese parents want the best for their children so the offerings by New Oriental fit the bill. And by offering certifications for adults, the company can continue earning revenue from people after they leave the education system.
Recently, the company reported earnings per share of $0.41 beating by $0.03. Revenues came in at $486 million, beating by $7 million. This was an increase of 33%.
The stock has been pushing higher since the middle of the year, so any pullback is a buying opportunity.
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#3. Alibaba (NYSE: BABA)
Alibaba is the Amazon of China. But Alibaba offers even more. I know, it’s tough to comprehend this since Amazon offers virtually everything.
But Alibaba also offers travel services, storefronts for agricultural products and are adding more services all of the time. And as more Chinese citizens gain access to the internet and grow their incomes, Alibaba will be their online stop just like it is with US citizens and Amazon.
When the company reported earnings in August, earnings per share came in at $1.17 beating estimates by $0.24. Revenues hit $7.4 billion, beating by $250 million. The company has been increasing revenues by close to 50% for a year now.
The stock has been a rocket to the upside, so any chance you get to buy is a good one as the stock price is only expected to continue to rise.
Risks Investing In China
As with investing anywhere, there are risks when investing in China. The biggest threats are the potential for trade wars with the United States. President Trump said he was going to fix the trade imbalance with China, but so far nothing has happened.
Any trade war could pose short term risk to the Chinese economy and stock market.
The next issue is the economy of China. After lackluster growth, it appears the economy is righting the ship. But like here in the United States, any slowdown in economic growth will weigh heavily on the stock market.
Finally, there is concern with the lack of tough reporting controls on Chinese companies. This means it is easier for Chinese companies to fudge the books and make it seem like they are more profitable than they really are.
The bottom line is before investing in China, make sure you do your due diligence on any stock to make sure you aren’t getting burned.
Overall, investing in China is a great opportunity to grow your wealth. But since there are risks, you want to make sure you don’t put all of your eggs in one basket. It may be tempting to do so when you read the stories of how China is booming in all areas, but this doesn’t mean you should take unneeded risk with your money.
Invest in a well diversified portfolio and you should be able to grow your money while keeping risk in check.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.