Growth in China? - Our 5 Top Stock Picks


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Chinese growth is something of a phenomenon and although a market like that can be volatile, and therefore risky, the opportunities for a risk tolerant investor are attractive. There are many Chinese stocks available on U.S. exchanges and their fundamental and technical performance can be evaluated like a traditional stock from North America or Europe. Assuming that the global economy is not going to sink back into a double-dip recession emerging market investments, like those listed below, are likely to outperform the major stock indexes by a wide margin.

We have listed the criteria we used to develop the search for these stocks below. You can also run the search yourself at . Try to modify the criteria yourself to meet your specific investing style.

In this case we've obviously limited the country on the stock to China.

Optionable and Shortable:

We use this criteria to filter out stocks that have liquidity problems and may be expensive to trade. It is usually safe to assume that if the stock has listed options and is easy enough to borrow that it can be shorted that there will be enough liquidity to accommodate most tradings strategies.

Return on Equity:
Looking for a stock with a positive return on equity (ROE) metric finds companies making a profit, and it summarizes a lot of key fundamental data into one easy to use score. If we were to deconstruct ROE you would see that it includes most of the important information from the income statement and balance sheet.

Price/Free Cash Flow:
We're using this fundamental to find stocks with a low price compared to their free cash flow.  Finding companies with strong cash flow can help reduce our risk because it will be easier for the firm to fund growth in the near term.

Guangshen Railway Co. ( GSH )  Breaking out above resistance, this stock could hit over $20/share again soon.

China Life Insurance ( LFC ) Currently breaking above resistance with a minimum upside target of $69 per share.

China Southern Airlines ( ZNH )  Breaking out on a stronger Yuan, this stock is set to take off.

China Education Alliance ( CEU )  Breaking above resistance and off a double bottom reversal pattern.

Fushi Copperwled ( FSIN )  Lots of volume on the recent rally. The current breakout could bring the stock back to that upper level of resistance around $12-13 per share.

Image Courtesy of kevinpoh


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
More Headlines for: CEU , FSIN , GSH , LFC , ZNH

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