Stellar Stocks: China Trio

03/18/2014 10:00 am EST

Focus: STOCKS

 

Richard Schmidt, growth stock expert and editor of Stellar Stock Alert, holds a number of China-based companies in his model portfolio; here, he highlights three that currently earn his buy rating.

We admittedly bought into China Automotive Systems (CAAS) too soon. The stock is still down from our original recommendation price, but the future looks very bright.

If you’ve paid attention to the Chinese car market's growth, you know that it’s one of the best growth stories of our day. The Chinese car market has grown tremendously, but it’s far from saturated.

In fact, we see their car market continuing to grow for the foreseeable future. While the middle class in the US dwindles, the growth of the Chinese middle class is just beginning.

So their market still has room to grow. And we’ll profit from it with our CAAS holding. If you haven’t bought in, do so now. CAAS is a strong buy.

Some people are suggesting that the iPhone introduction into China wasn’t a good thing for China Mobile (CHL). Frankly, they’re making a harsh judgment much too early.

Yes, the stock came down after the announcement. But you know the old adage, "buy on the rumor, sell on the news."

Well, this is one case where it was accurate (it isn’t always). But it wasn’t the iPhone news that pulled the stock down. It was simply a continuation of a long-term correction.

“Long-term” for CHL is about six to eight months. This stock bounces around a lot for being such a large stock. Now we’re looking at a chart that’s looking very bullish.

The stock looks like it has bottomed. As sales of the iPhone move through China, CHL is going to be the biggest beneficiary of this huge market. So we expect CHL to move back up in the coming months. CHL is a buy.

Shares of e-House Holdings Limited (EJ) finally came to life in the last five months of last year. They cooled off in January, but moved back up in February.

Like the car and phone industry in China, the rising middle class is pushing that country's markets up in a big way. Now we’re seeing it in their housing market. EJ is still below our recommended price, but our patience is paying off. That will change in the near future. EJ is a strong buy.

iShares FTSE/Xinhua China (FXI) moved up about 10% in February. The strong move came as a result of a strong resurgence in China’s economic growth and its improved quality.

As investors are looking for the next big opportunity, many are seeing the sideways movement our market is set to experience. And they’re moving to Chinese stocks. The FXI is a buy.

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