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Chinese Small Caps For 2011
As we look back on 2010, China again seems to have remained a key interest of many investors. While international markets should be approached with a very high degree of caution and skepticism, there are a few Chinese companies that have quality fundamentals and will likely continue to execute in the year ahead. (For more, see Investing In China.)
IN PICTURES: Eight Ways To Survive A Market Downturn
A Big Warning
Many Chinese companies have appreciated considerably more than the overall market. As a result, whatever bargains existed may now be fairly priced at best, or otherwise overvalued. It's likely that the anticipated future growth may be priced in.
Secondly, despite how fundamentally sound and attractively valued certain stocks may be, should the overall Chinese market suffer a sharp or prolonged correction, expect share price declines in even the best of names. You don't have to go back too far in time - 2008 to be exact - to realize what can happen when a market crumbles after a hot run.
Finally, despite China's wonderful long-term growth story, you are investing in country where the state still makes all the important decisions. (For more, see Top 6 Factors That Drive Investment In China.)
Names To Watch
AgFeed Industries (Nasdaq:FEED) sells animal feed and is engaged in the acquisition of pig farms for pork production. China is the world's largest consumer of pork. The shares trade at $2.40. While the Chinese won't stop eating pork anytime soon, competition from poultry and beef is always a threat. If prices of those two proteins decline, they become a more attractive substitute for pork.
Yuhe International (Nasdaq:YUII) is one such competitor, as it is a producer of day old chicks ultimately used for poultry production.
American Oriental Bioengineering (NYSE:AOB) is a pharmaceutical company in China working on becoming one of the top players in the country. Like many drug companies, AOB derives a bulk of its sales from a handful of products. If it can open up its pipeline to other potential blockbusters, this company is one to watch. Shares currently fetch around $2.25 valuing the company at $177 million and 6.7 times earnings.
SORL Auto Parts (Nasdaq:SORL) manufactures auto parts primarily for commercial vehicles. The company has very little debt and trades at 9 times earnings. This could be one to watch in 2011.
Hot or Not
China's growth potential continues to astound many and the consensus view is that equities have gone beyond rational expectations. Whether that's true or not, time will tell, but it's always a good idea to have some ideas close by. (For more, see Broadening The Borders Of Your Portfolio.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: Eight Ways To Survive A Market Downturn
A Big Warning
Many Chinese companies have appreciated considerably more than the overall market. As a result, whatever bargains existed may now be fairly priced at best, or otherwise overvalued. It's likely that the anticipated future growth may be priced in.
Finally, despite China's wonderful long-term growth story, you are investing in country where the state still makes all the important decisions. (For more, see Top 6 Factors That Drive Investment In China.)
Names To Watch
AgFeed Industries (Nasdaq:FEED) sells animal feed and is engaged in the acquisition of pig farms for pork production. China is the world's largest consumer of pork. The shares trade at $2.40. While the Chinese won't stop eating pork anytime soon, competition from poultry and beef is always a threat. If prices of those two proteins decline, they become a more attractive substitute for pork.
Yuhe International (Nasdaq:YUII) is one such competitor, as it is a producer of day old chicks ultimately used for poultry production.
American Oriental Bioengineering (NYSE:AOB) is a pharmaceutical company in China working on becoming one of the top players in the country. Like many drug companies, AOB derives a bulk of its sales from a handful of products. If it can open up its pipeline to other potential blockbusters, this company is one to watch. Shares currently fetch around $2.25 valuing the company at $177 million and 6.7 times earnings.
SORL Auto Parts (Nasdaq:SORL) manufactures auto parts primarily for commercial vehicles. The company has very little debt and trades at 9 times earnings. This could be one to watch in 2011.
Hot or Not
China's growth potential continues to astound many and the consensus view is that equities have gone beyond rational expectations. Whether that's true or not, time will tell, but it's always a good idea to have some ideas close by. (For more, see Broadening The Borders Of Your Portfolio.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Investopedia Staff
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