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3 Chinese Stocks to Buy Right Now

Three Chinese stocks — Weibo Corp (ADR) (NASDAQ:WB), Tencent Holdings Ltd (OTCMKTS:TCEHY) and Momo Inc (ADR) (NASDAQ:MOMO) — have become “screaming buy” names.

Weibo and Tencent are begging to be bought after unjustified pullbacks, while Momo stock is an up and coming name that is still very cheap by any standard.

Of course, all three Chinese stocks will benefit tremendously from the extremely rapid growth of internet use among Chinese citizens, as well as from the still strong expansion of the Chinese economy.

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Chinese Stocks to Buy: Weibo (WB)

Chinese Stocks to Buy: Weibo (WB)
Chinese Stocks to Buy: Weibo (WB)

Source: Shutterstock

On Jan. 26, the price of Weibo stock exceeded $136-per-share. By Feb. 8, the shares had plunged to around $112 and Weibo stock is now trading around $115.

Market weakness undoubtedly played a role in the decline, but the Chinese government’s decision to order the company to suspend several portals for a week on Jan. 27 probably contributed to the retreat as well. Investors often get scared after such crackdowns, but they have happened before without having any major impact on Weibo and Weibo stock has still risen tremendously over the long-term despite these actions by Beijing.

Moreover, the Chinese government does not have any significant legal constraints as in America, nor does it have to worry meaningfully about popular opinion. Therefore, if China wanted to take drastic action against Weibo, it would have done so already. I believe that Beijing takes these steps periodically simply in order to remind popular internet websites that they must prevent their users from posting content that violates Beijing’s rules too directly.

Meanwhile, Weibo’s fundamentals remain strong. The company’s fourth-quarter results beat expectations, and research firm Jefferies recently raised its price target on the shares to $160 from $150, The Fly reported. According to Jefferies, “the combination of user growth, time spent, ad pricing improvement and diversifying video ad products gives the company the ‘right formula in further scaling up monetization efficiency'”.

Finally, as I’ve said in the past, there is a good chance that Weibo will be taken over by Alibaba.

Chinese Stocks to Buy: Tencent (TCEHY)

Chinese Stocks to Buy: Tencent (TCEHY)
Chinese Stocks to Buy: Tencent (TCEHY)

Source: Shutterstock

Tencent stock has tumbled after South African conglomerate Naspers said that it would sell a 2% stake in the company, cutting its total holdings of Tencent stock to a 31.2% stake. But Naspers, which reportedly promised that it would not sell anymore shares of Tencent stock for three years, obviously kept most of its shares in the company.

Additionally, Naspers said that it would use the $9.8 billion in proceeds from the stock sale to build up its own e-commerce business. Investors sell stocks for many reasons, not only because they have lost confidence in the company in which they invested. In this case it appears that Naspers sold Tencent stock because it wants to invest more in its own e-commerce business.

Furthermore, as this columnist pointed out, Tencent is dominant when it comes to time spent on its apps, “has strong network effects,” should benefit from the continued strong growth of the Chinese economy, and reported “solid” fourth-quarter results. Finally, Tencent appears to be gaining ground on Alibaba in the lucrative Chinese payment sector.

Chinese Stocks to Buy: Momo Inc

Chinese Stocks to Buy: Momo Inc
Chinese Stocks to Buy: Momo Inc

Source: Shutterstock

As my colleague, InvestorPlace columnist Luke Lango, pointed out, Momo which “most closely resembles Tinder,” is highly leveraged to the rapid growth of internet use among Chinese citizens, but Momo stock is much cheaper than most of the other names in the space. And even though Momo stock has rallied about $10-per-share since Lango wrote his article, Momo stock is still pretty cheap, trading at a trailing price-to-earnings ratio of 23.84.

Additionally, Momo reported better than expected results on Mar.7, and Morgan Stanley started coverage of Momo stock with an Overweight rating on Mar. 28. The firm called the company ” the leading mobile social networking platform in China”.

As of this writing, Larry Ramer owned shares of Weibo stock. 

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The post 3 Chinese Stocks to Buy Right Now appeared first on InvestorPlace.

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