Top 5 Best Chinese Stocks On Nasdaq And NYSE

  • A list of the best Chinese stocks trading on Nasdaq/ NYSE.
  • Past trends and future outlook for these ADR stocks.
ADR stocks

China has been the growth engine for the entire world’s economy for over two decades. As the Chinese companies take their spot among the largest firms in the world there has been an increasing appetite among them to seek greater financial resources. One of the ideal ways has been through American Depository Receipts (ADRs). It helps both the companies and the investors in reducing their expenses on financial transactions and makes the overall trade much more transparent and fluid. Chinese internet stocks and mineral stocks include some of the best Chinese stocks one can invest in. We look at some of these ideal Chinese stocks to buy and invest in.

  1. PetroChina Company Limited

PetroChina (NYSE:PTR), Industry - Oil and Gas Production
It is one of the biggest oil and gas producers in the world. Besides production it is also involved in refining and sale of basic and derivative petrochemical products. These involve gasoline, kerosene, diesel, polymers, urea and synthetic rubbers. After getting a major drubbing during the financial crisis it has recouped majority of its losses. It has a market cap of over $310 billion and is selling at a P/E ratio of 9.11 providing good dividend yield of 4.7%. This makes it one of the biggest Chinese ADR stock and one of the lower valued Chinese stocks to buy.

PTR stock versus oil index
Fig 1: Comparison of PTR stock to the oil & gas integrated index. We can see that the stock has had only two major low returns period in 2008 and 2013 in the past 10 years.

However the current fall in oil prices has had a detrimental effect on the stock and the firm has lost over a quarter of its market value in the past six months. As the oil market corrects itself PTR stock should see a good upside push through macroeconomic tailwinds. The last quarter’s revenue was $97.5 billion with an operating margin of 8.2%.

  1. China Mobile Limited

China Mobile (NYSE:CHL), Industry - Telecom
It is a behemoth in all senses in the world of telecom. Whether one takes the total subscribers, revenue or market cap, China Mobile has been able to beat its peers hands down. The reason behind this is its majority market share in the Chinese market where it has over 700 million users. The company is valued at a staggering $270 billion at a P/E of 15. It also provides reasonable dividend yield of 2.95%. The company has shown a bullish momentum for the past one year and has given returns of over 50% during this time. It controls a major part of the market share with close to 70% market share, the remaining market being shared by China Unicom and China Telecom.

China Mobile revenue
Fig 2: Revenues of China Mobile

It has also benefited by the agreement signed with Apple (NASDAQ:AAPL). This agreement allowed Apple to increase its footprint in the Chinese market and provided good revenue stream to China Mobile. (Also See: Why is Apple a value stock, watch our Apple stock analysis)

  1. Alibaba Group Holding Ltd

Alibaba (NYSE:BABA), Industry - Online Retail
This company is the quintessential story showcasing the growth in China and a testament to the gargantuan demand within the retail sector in the Chinese economy. It has had a meteoric rise in the past decade and now controls over half of the entire online retail segment within China.

Alibaba revenue
Fig 3: Rise in Alibaba revenue in the past five years.

The scale of its operations can be understood by comparing its Singles day sales (biggest shopping day in China) to Cyber Monday sales in US. Alibaba sold a told merchandise of over $9 billion on that day as compared to $2 billion of Total ecommerce sales on Cyber Monday in US.

ALibaba GMV sold
Fig 4: Gross Merchandise Value (GMV) sold on Alibaba’s platform in billion yuan. 1 USD approximately equaled 6.15 Chinese Yuan for the past 2 years. GMV for 2014 was more than $350 billion.

The retail appetite within the Chinese economy will only increase ensuring a good growth rate for Alibaba on its home turf. At the same time it is trying to move into other geographies to expand its revenue stream. Alibaba which had a high profile IPO last year, is valued at over $220 billion and owing to the higher growth rate it is trading at a high valuation of close to 50 in P/E terms. For new investors this is one of the best Chinese stocks to invest in. As Alibaba expands into newer geographies and focuses on mobile purchase it will face greater pressure on the margins. It showed impressive EBITDA margin of 40.5% in the latest quarter.

  1. China Life Insurance Company Limited

China Life Insurance (NYSE:LFC), Industry - Insurance
It is the largest insurance group in Mainland China and covers all the major insurance segments in China. Being the market leader in its sector has allowed it to gain a huge market share for all the three segments it is in: Short term insurance, Individual Life insurance and Group Life insurance. The company has a market capitalization of over $150 billion by the start of 2015. Since the financial crisis crippled major financial institutions it has had a lackluster performance on the Wall Street compared to other sectors. Its life insurance premiums accounted for 34.75% of the mainland‘s life market share.

As the Chinese economy moves to a service oriented economy like its western counterparts one can be sure that this sector will see good growth in the coming years. Currently the premiums are still low as a percentage of GDP. It totaled only 2% of GDP compared to 8% for other mature markets like Japan and South Korea.

  1. Baidu Inc

Baidu (NASDAQ:BIDU), Industry - Internet Services
It is the biggest search engine on Mainland China and one of the best Chinese stocks for 2014. For the past few quarters it has been losing its market share to its competitors Qihoo 360 (NYSE:QIHU) and Sogou the search engine by Sohu (NASDAQ:SOHU) but still retains over 50% of the market. It is the biggest growth story in China’s internet industry. Since the financial recession the company has seen a 15 fold rise in Baidu compared with Google (NASDAQ:GOOGL) which grew over three fold in this time. The main reason for the increase in Baidu stock value was the increasing internet penetration in China and growing revenue streams. The company is valued at close to $75 billion with a P/E of 36.
(Is Google a buy or Baidu? Watch our Goolge stock analysis and Baidu stock analysis to decide which search engine company is a better investment!)

Baidu Revenue
Fig 5: Rising revenues shown by BIDU in the past 5 years.

BIDU-price-chart (1)
Fig 6: Baidu stock Vs S&P by Amigobulls

Although the Baidu stock is not cheap, the company has made forays into newer internet related industries to increase its revenue stream and stabilize its market share. One of the latest investments by the company was in taxi hailing market through its investment in Uber. With a robust growth in the internet sector in China this firm is at the perfect place to take advantage of its vanguard position and build a sustainable business thus making it an ideal Chinese internet stock.

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