While a lot of investors have been hesitant towards betting on Chinese stocks because of the mixed bag of emotions the trade war has brought, there have still been some Chinese companies that have been able to see solid returns. Trade relations between the U.S. and China took a turn for the worse in March 2018 and since then, the S&P 500 has gone up 12% while the Shanghai Composite has declined more than 6%. For over a year now, the countries have slapped on tariffs on billions of dollars worth of goods. The tit for tat tariffs have shaken consumer confidence with people fearing it will result in corporate earnings decline or slowed economic growth.
In spite of the tension between the two countries, some stocks have still been able to see solid returns through the year. Mutual fund manager Lewis Kaufman believes there is a robustness to China that is not present anywhere else. Kaufman has seen substantial returns on his bullish investment strategy for Chinese stocks. Lewis Kaufman’s fund, Artisan Developing World ARTYX, has been able to outperform 98% of its peers over the past three years, returning more than 15% annually to investors. The mutual fund has been tearing it up this year, as it has currently returned over 31% year-to-date. Kaufman’s Artisan Developing World is currently listed as a Zacks Mutual Fund Rank #1 (Strong Buy). Let’s see which stocks can potentially make strong additions to diverse portfolios for investors looking to play the field.
Alibaba BABA provides technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem. The company is one of the leading ecommerce companies in China and is currently a Zacks Rank #2 (Buy). Alibaba has been able to exceed our Consensus Estimates three out of the past four quarters for an average EPS surprise of 12.52%. On top of beating estimates, the e-commerce giant has seen a price increase of 23.2% since the start of the year. In addition to the stock’s solid performance in 2019, Conesnsus Estimates are projecting Alibaba’s bottom line to spike 18.03% with a revenue surge of 35.14% for the current quarter. Alibaba is a Chinese stock that has been proving itself lately as a company that can provide positive returns for investors and can appeal to those feeling bullish about China.
TAL Education Group
TAL Education Group TAL is an after-school education company in China that provides tutoring for K-12 students. The after-school company covers a variety of subjects that provides students with an additional resource to supplement them in their studies. Furthermore, the tutoring company is the biggest holding in Kaufman’s Mutual Fund at nearly 5%. TAL Education Group is currently sitting at a Zacks Rank #3 (Hold) and has risen 39.7% since the start of the year. The company has been significantly outpacing our estimates with a whopping EPS surprise average of 55.18% for the last four reported quarters. TAL can provide a safe haven for investors looking to take cover from the trade war since the company is not as heavily affected by tariffs like others. The prioritization of education in China can provide the demand stability the company needs to continue its recent successes into the future.
Tencent Holding TCEHY is a Chinese internet service company that has been able to see decent returns despite an escalating trade war. The internet company focuses on bringing together China’s largest internet community. TCEHY has been able to substantially outperform the broader internet services market since the start of 2019, rising 14.2% while the industry is down 0.5%. Tencent Holding is listed as a Zacks Rank #3 (Hold) at the moment and has some solid growth estimates. Year-over-year estimates are calling for a 26.67% bottom line increase on the back of a 27.71% jump in sales for the next quarter. Double digit increases in earnings and revenue continue to be projected through 2020. While Tencent Holdings is susceptible to the tariffs from the trade war, the company’s innovative initiatives and growth potential can encourage shareholders to weather the storm.
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