Tickers in this Article: CISG, HMIN, AMEX:ONP, CHBT, NEWN.OB
Value and China, two words that mix as nicely as oil and water. The old belief that China is merely a growth engine, leaving value investors on the sidelines, is no longer true. The recent pullback in Chinese stocks, combined with increasing earnings of publicly traded companies, has created opportunities for value investors looking to enter China. There are five little-known and even more importantly little-followed Chinese stocks offering value for U.S. investors. PICTURES: 9 Ways To Use A Tax Refund

CNinsure (Nasdaq:CISG) is a leading independent insurance company based in China. CISG has a wide variety of property and casualty insurance products along with life insurance products. Fundamentally, the company is projected to make $1.17 per share in 2010, followed by $1.50 in 2011. Based on the 2010 earnings estimates, CISG is trading with a P/E ratio of 19.4 and looking ahead to 2011 the P/E falls to 15.1. Considering the growth of is over 20%, the stock is undervalued with a PEG ratio below 1. (For more, see PEG Ratio Nails Down Value Stocks.)

Value in Hotels
Home Inns and Hotels Management (Nasdaq:HMIN) is in the hotel business in China. Through its subsidiaries, the company develops and operates hotels under the name brand Home Inns. The company earned 80 cents per share in 2009, a 122% increase from the year earlier. The earnings estimates for 2010 and 2011 are 94 cents and $1.19, respectively. Based on pure valuation, HMIN is not a screaming buy. However, with a P/E ratio of 28.5 based on 2011, the company is not overvalued either. Due to the huge potential for the middle class to continue to grow in China, this is a high-reward/high-risk play.

Pulp to Paper
Orient Paper (AMEX:ONP) is in the paper business in China, which includes writing paper and packaging products. The company is a play on the economy improving as more demand for its goods is a byproduct of a strong economy. ONP is a pure value play based on its current and projected earnings. The company is on pace to earn $1.05 per share in fiscal year 2010, and $1.55 in 2011, a 48% increase year-over-year. Based on 2010 estimates, the stock has a P/E ratio of 8.5. (For more, see Investing In China.)

Playing with Power
New Energy Systems Group (OTCBB:NEWN) manufactures and distributes lithium ion batteries and components mainly in China, but it is also expanding into other continents. Its products are mainly used for small electronic devices such as phones, cameras and MP3 players. During the recent first-quarter earnings call, the company announced record revenue and earnings; revenue increased an amazing 753% to $22.5 million. The company reconfirmed its view of earnings per share for 2010 at $1.23; this results in a 2010 P/E ratio of 5.5. Until NEWN moves to the Nasdaq or NYSE, it could continue to trade at a great discount. However, as a long-term play it is tough to go wrong holding the stock.

Healthy Stocks
The last stock is China-Biotics (Nasdaq:CHBT), a maker and distributor of probiotics products in China. Its products are used as dietary supplements to help the digestive system, blood pressure, and the immune system to name a few. As of the end of March, 2009 the company had over 100 "Shining" branded stores in China. Fundamentally, the company is expected to earn $1.26 per share in fiscal 2010, putting the P/E ratio at 11.6. Net income should move to $1.58 in 2011, and early estimates have 2012 EPS above $2 per share. Again, this is an example of a Chinese stock that combines value and growth.

The Bottom Line
One disclaimer for the above-mentioned stocks has to do with volatility and mispricing. Chinese stocks will experience more day-to-day volatility than their U.S. peers, which can be too much for many investors. Also, the reason the P/E ratios are so low is that they are mispriced, and there is a lack of analysts on Wall Street covering them. Once the Street gets wind of the stocks, look for the prices to rise. (For more, see Top 6 Factors That Drive Investment In China.)

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