5 Red-Hot China Stocks

China Is the New Land of Opportunity

If you’re looking for an economy growing with the fury of a fire-breathing dragon, then look no further than China. The country really is the economic
hotspot on the globe.

A recent Goldman Sachs report estimated that China’s GDP growth will exceed its previous estimate of 8% this year. China also recently passed the
U.S. as the world’s largest auto market for the first half of 2009.

In what I think is a very revealing statistic, I just read that the number of U.S. companies in Fortune‘s Top 500 companies in the world
fell to only 140, which is the lowest ever, while China now has 37 companies, including 9 new entries.

I think it’s fair to say that China is the new land of opportunity when it comes to economic growth. But how can the individual investor hitch a
saddle to this fire-breathing dragon?

NEXT – Finding the Best Chinese Stocks

Finding the Best Chinese Stocks

For most individual investors in the U.S., it’s hard to become intimately familiar with the Chinese corporate landscape. After all, American investors
have been conditioned to look at opportunities here at home first. But I think this is a mistake.

The fact is that the U.S. market indices rarely lead the world in terms of the performance, so investors who forgo investing in stocks located outside
the U.S. are only putting governors on their own bottom line. Still, the question of how you find the best stocks — particularly in such a diverse
market as China — is a valid one.

I think the key to unearthing great China investments is to make sure you are buying something with a strong earnings record combined with strong
buying pressure. This is true even of U.S. stocks; however, when it comes to stocks you aren’t likely as familiar with, a solid earnings record and
a lot of buyers makes all the difference.

NEXT – Buying China Stocks – What to Look For

Buying China Stocks – What to Look For

When it comes to finding market-beating stocks on Wall Street, there are two critical characteristics I look for. The first is strong fundamentals.
And by that I mean sales growth, earnings growth, etc. Growing companies are companies that are healthy and thriving. They usually have smart leaders
who know how to run and manage a smart business.

The second characteristic I look for in any great stock is strong buying pressure. Think of this as “following the money.” The more money that floods
into a stock, the more momentum a stock has to rise.

To measure both the fundamental health and the buying interest of companies — be they located in the U.S., China, or anywhere around the globe — I
use my Portfolio Grader stock rating tool[1], which assigns a letter grade to
each stock based on how well it performs on these criteria.

The following five China stocks all are rated A according to Portfolio Grader, which means I think they’re all strong buys here.

Let’s take a closer look at each of these fire-breathing dragons.

NEXT – China Stock #1 – China Green Agriculture

China Stock #1 – China Green Agriculture (CGA[2])

You might say that China Green Agriculture (CGA[2]) is the salt of the earth when it comes to China
stocks. Well, maybe not salt in the literal sense, just more in the metaphoric sense.

Literally, China Green Agriculture is a maker of fertilizer. The company’s humic acid organic liquid compound fertilizers help enrich the soil needed
to grow the food that sustains China’s ginormous population. The company produces approximately 119 fertilizer products, and it markets those products
to private wholesalers and retailers of agricultural farm products.

And talk about strong price momentum — CGA shares are up 360% over the past 12 months!

I rate CGA an A, making it a strong buy.

NEXT – China Stock #2 – E-House (China) Holdings

China Stock #2 – E-House (EJ[3])

China’s massive citizenry has to be housed, and that’s the job of E-House (China) Holdings (EJ[3]). The
company provides primary real estate agency services, secondary real estate brokerage services and real estate consulting and information services.

Its secondary real estate brokerage services include offering advisory services on choices of properties, accompanying potential buyers on house
viewing trips, drafting purchase contracts and negotiating purchase prices and other terms. You might say that E-House (China) Holdings is the go-to
real estate agent for the Chinese people.

Hey, the housing boom may have fizzled out here in America, but in China housing is all the rage. And judging by the 134% gain in EJ shares over
the past 12 months, investors certainly think this fire-breathing dragon is hot.

I rate EJ an A, making it a strong buy.

NEXT – China Stock #3 – Kong Zhong Corporation

China Stock #3 – KongZhong Corporation (KONG[4])

Thanks largely to the country’s tremendous economic growth, there’s a new middle class in China. They have more leisure time than ever before, and
that means big opportunity for entertainment provider KongZhong Corporation (KONG[4]).

The company provides wireless interactive entertainment, media and community services to mobile phone users, but it also offers interactive entertainment
services, including mobile games, pictures, logos, karaoke, electronic books and mobile phone personalization features such as ring tones. The Chinese
love their cell phones, and KongZhong provides much of the content that goes on those phones.

Investors certainly haven’t been hesitant to dial up shares of KONG, as the stock is up over 218% in the last 12 months.

I rate KONG an A, making it a strong buy.

NEXT – China Stock #4 – Shanda Interactive Entertainment

China Stock #4 – Shanda Interactive Entertainment (SNDA[5])

Cell phone content isn’t the only form of entertainment in the People’s Republic. Chinese citizens love their video games, and the premier company
providing those games is Shanda Interactive Entertainment (SNDA[5]).

The company offers a portfolio of entertainment content, including massive multi-player online role playing games that have become almost an addictive
pastime in China. Games such as Latale, Dungeons and Dragons Online and World Hegemony all have nearly cult-like followings among the Chinese, and
many of these games — as well as many others — draw upon various Chinese historical themes, such as the development of the martial arts.

Shanda’s stock price over the past 12-months seems rather tame when compared to the price performance we’ve seen so far, but the shares are still
up a remarkable 79% over the past 12 months.

I rate SNDA an A, making it a strong buy.

NEXT – China Stock # 5 – Universal Travel Group

China Stock #5 – Universal Travel Group (UTA[6])

As China’s economy grows, the Chinese middle class has taken flight — literally. Providing the travel arrangements for this newfound class
of Chinese travelers is Universal Travel Group (UTA[6]).

The company provides domestic and international airline ticketing services, along with cargo transportation agency services. But it’s not just flights
that UTA helps citizens book. The company also provides hotel reservations, tour planning, ground transportation, railway and express delivery and
air delivery services.

UTA is the travel agency in China, and considering the shares have booked a 190% gain over the past 12 months, it certainly seems like the
sky is the limit for UTA.

I rate UTA an A, making it a strong buy.