Daily Gains Letter

Chinese stocks


How to Position Yourself as China Becomes World’s Biggest Economy

By for Daily Gains Letter | Sep 10, 2014

How to Play the Rally in Chinese StocksI’m not sure how many of my Daily Gains Letter readers realize that Chinese stocks, as reflected by the Shanghai Composite Index (SCI), have outperformed the S&P 500 so far this year. After offering up underwhelming performances since 2009, the SCI has rallied 9.98% this year, compared to 8.44% for the S&P 500 and 3.23% for the Dow Jones Industrial Average as of Monday.

We’re not talking about resurgence in Chinese stocks and a return to the glory days more than five years ago; instead, I’m simply saying there’s finally some buying in an oversold Chinese stock market.

Shangai Stock Exchange Composite Index Chart

Chart courtesy of www.StockCharts.com

Of course, there’s the high anticipation of China-based Alibaba (NYSE/BABA) joining the U.S. capital markets on September 19; this move will likely stroke the enthusiasm of investors here. The Internet services company is massive and will give U.S. companies a run for their money, further opening the U.S. market to consumers and businesses worldwide. You can wait and pick up shares of Alibaba or you can play the company via Yahoo! Inc. (NASDAQ/YHOO), which holds a 23% stake in Alibaba.

Now, if you’re a regular reader, you may know that I have been, and continue to be, bullish on the Chinese economy and China. Yes, the economy is stalling, but we are still talking about growth of around 7.5% this year, which is far greater than the rest of the G7 countries.

Just like Facebook, Inc. (NASDAQ/FB) in the social media market with its more than one billion users and enormous potential, I feel the same towards China and its 1.3 billion people. When you have a market … Read More


Time to Shift Some Capital into China’s Stalling Economy?

By for Daily Gains Letter | May 15, 2014

Why Should Consider Buying China NowWhile the stock market is running higher and we have seen some outlandish valuations with many of the high-momentum technology stocks, Chinese stocks continue to wallow.

There are critics saying China is primed for a stock market meltdown, but we have yet to witness this despite the stalled growth in the country. And while some argue the country is stalling, you also have to keep in mind that gross domestic product (GDP) growth in the seven-percent range is not that bad.

Many pundits estimate China will expand at around 7.5% this year. Even if the growth was a tad short, it’s still much higher than the rest of the industrial world. Look at the United States; it’s growing at less than three percent, yet the stock market appears to be fine with that.

Famed investor Jim Rogers, who has been a perennial bull on Chinese stocks, continues to believe China is ripe for strong investment growth. I’m also in that camp.

The Chinese government is looking at liberalizing foreign investments and stock ownership in the country, which should help to add buying interest to the country.

China’s stock market indices have vastly underperformed U.S. indices since late 2008, and this continues to be the pattern. The price chart shows the downward trend in the Shanghai Composite Index from 2008 (shown by the red candlesticks) compared to the upward move in the S&P 500 (shown by the dark green line) on the chart below.

My thinking is that it may be time to look at China if you are not already invested there. You just need to be careful and pick … Read More


Why These Two China-Based Internet Stocks Are Worth a Closer Look

By for Daily Gains Letter | Mar 3, 2014

China-Based Internet StocksWe all know how hot the social media space is with some sizzling returns shown by such stock market heavyweights as Facebook, Inc. (NASDAQ/FB), Twitter, Inc. (NYSE/TWTR), Yelp, Inc. (NYSE/YELP), and LinkedIn Corporation (NYSE/LNKD) to name a handful.

The valuation of these momentum stocks is especially high, but as long as there are buyers, these stocks will continue to attract major market surges.

Much of the easy money may be gone for now, but there are still some Internet stocks trading here that offer excellent potential for some staggering gains for aggressive traders.

Yet the stocks I’m referring to are based out of China, where the added risk is high due to the questionable reliability of the auditors and subsequent results.

If you are confident on the numbers of these Chinese stocks, it may be worth a speculative trade, but be warned that the risk is high, so don’t go and bet your 401(k) on these speculative Chinese stocks. Use only risk capital and make sure you are diversified; this will take some of the edge off the trade in case the stock goes against you.

If you like Amazon.com, Inc. (NASDAQ/AMZN) but aren’t willing to chase the high stock price and valuation, you may want to take a look at China-based E-Commerce China Dangdang Inc. (NYSE/DANG), which has been referred to as the Amazon of China. The online seller of books, home products, footwear, electronic and personal products, and related accessories has about 8.9 million active users as of its fourth quarter (ended December 31, 2013). The company also said it added about 3.1 million new users in that … Read More