The Coronavirus hit China first. And it hit them hard.!
However, it does appear that they were able to contain the virus and greatly reduce the spread within their own country. This gives China the ability to get their economy back on track sooner than expected. And thus we investors need to take notice.
That is why I want to focus your attention on 3 of the best looking China stocks at this time. Not just for a bounce from recent bottom. But also for the long term growth potential: Alibaba (BABA), Melco Resorts & Entertainment (MLCO) and NetEase (NTES).
Alibaba Group (BABA)
All stock lists should start with Alibaba. For every reason that you love Amazon, you have to feel as good, if not better with BABA as a long term core holding in just about any portfolio.
Back to the current story, there may not be a lot of information available yet for Q1, but I am able to glean a bit from the investor call BABA had in mid-February. As expected, results were a mixed bag: less revenue from restaurants and travel, and spikes in grocery and the multiple digital segments (video chat, etc.). As China appears to have weathered the worst of the COVID-19 storm, I see BABA as a buy. Even if revenues dip in the short run you know that the long term picture for BABA has growth written all over it. Not just from the expansion within China, but also as they have aspirations to move beyond their borders and take more share in more parts of the globe.
(BABA is one of 5 stocks inside the Reitmeister Total Return portfolio that generated a +5.13% gain while the market tumbled -14.97% in mid-March. Learn more about Reitmeister Total Return).
I’ve recently talked about the probable increase in video game consumption, and NTES is well-poised to reap the benefits of this trend. In addition to their established games, NTES is working on the development of an advanced VR multi-player game which will be set in an “open world”. Even without the virus, the popularity of the Westward Journey Series, World of Warcraft, and the new VR developments, NTES has a lot to offer!
Yes, their revenue has seen a 429% growth, but also keep an eye on the 515% increase in debt. I like this one because the company isn’t resting on its laurels and has some very interesting developments in the pipeline. That is why Wall Street analysts remain so favorable on the NTES with an average price target of $404 with some as high as $439. Growth and value are two great reasons to consider NTES at this time.
Melco Resorts and Entertainment Ltd (MLCO)
Macao’s casino business has fallen off a veritable cliff which explains the 41% drop in MLCO shares so far this year (after a 42% gain in 2019). However, the worst appears to be in the rearview mirror.
The main issue that MLCO has been facing is the travel ban as most of its customers are from mainland China and Hong Kong. Once these restrictions ease up, I expect a lot of pent-up demand to come funneling through putting wind back in MLCO’s sails.
Shares rallied 10% Tuesday, but ut the opportunity with MLCO is far from over. That is why the 5 Star analyst from JP Morgan stands behind shares with a still street high target of $30. Yes, it may take a while to get back there, but with when things get back to normal in Asia, then they will get back to old habits. And yes, that gambling habit is a hard one to break. That is why MLCO is so attractive at the current level.
Want more great investing ideas?
The Fake Rally is Over! – Why the bear is still in charge. Along with the right investment strategy to generate profits while stock prices head lower.
How to Make Money in a Bear Market – Learn more about this vital webinar 4/9 hosted by Steve Reitmeister & featuring famed investor Marc Chaikin.
Reitmeister Total Return portfolio – Discover the portfolio strategy that Steve Reitmeister used to produce a +5.13% gain while the S&P 500 fell by -14.97%.
BABA shares were trading at $188.26 per share on Wednesday morning, up $2.51 (+1.35%). Year-to-date, BABA has declined -11.24%, versus a -23.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
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