A China Trio

12/12/2013 10:00 am EST


We haven't yet entered into the "irrational exuberance" we saw back in the 1990s; for now, we fully expect the Santa Claus Rally and January Effect to push the markets higher, forecasts Richard Schmidt, editor of Stellar Stock Alert.

During the market in the late 1990s, we saw companies with little revenue, but lots of promise, making huge inroads on the market. Today, it's just the opposite.

The companies getting rewarded are the companies that are producing. Companies that don't produce don't get rewarded by today's market. That's very bullish.

Meanwhile, the overall rally in Chinese stocks is paying off, with more room to grow. iShares FTSE/Xinhua China (FXI), which corresponds to the FTSE China 25 index, showed great strength mid-month, with a 10% jump in a matter of days.

The move indicates our push toward Chinese stocks is paying off, as this sector continues to improve. The overall rally in Chinese stocks is paying off, with more room to grow. FXI is a buy.

China Automotive Systems (CAAS), which makes auto systems and components, reported record-high net sales for the third quarter. The report excited investors, who bid the stock up about 30% for the month.

We're still down substantially from our recommended price, but we like the direction the company is moving. We expect the stock to make back our losses and bring us into profitability in the next year to 18 months. CAAS is a buy.

e-House Holdings Limited (EJ), a Chinese real estate services company, continued its move back up in November. With strong third-quarter earnings, the stock jumped up over 30%.

But the jump up was more of a dead-cat bounce, as the stock pulled back. Still, the stock finished the month with a strong 12% gain. We liked the earnings report.

Now we'd like to see it hold onto the gains it makes from these reports. Too many investors are still trying to sell on these bounces. Continued earnings improvements will bring more investors in and keep them in. EJ remains a buy.

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