Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? Among the best are Nio (NIO), Baidu (BIDU), Li Auto (LI), Pinduoduo (PDD) and BYD Co. (BYDDF).
XChina is the world's most-populous nation and the second-largest economy, with a booming urban middle class and amazing entrepreneurial activity. Dozens of Chinese stocks are often among the top performers at any given time, across an array of sectors.
In late August, U.S. and Chinese regulators signed an audit supervision deal, which should end the threat that the SEC would delist the likes of Alibaba, Nio and many more.
But China risks are always a factor.
China lockdowns are easing again, but the "zero-Covid" policy means serious restrictions or shutdowns are always a few cases away.
Best Chinese Stocks Across Many Industries
As the world's largest internet market, it's no surprise to see big growth from China stocks focusing on e-commerce, messaging or mobile gaming. Notable Chinese internet stocks include:
- Alibaba (BABA)
- JD.com (JD)
- Pinduoduo (PDD)
- Tencent (TCEHY)
- Vipshop (VIPS)
- Baidu (BIDU)
- Tencent Music Entertainment (TME)
- NetEase (NTES)
- Trip.com (TCOM)
- Dada Nexus (DADA)
- Bilibili (BILI)
- Joy (YY)
- KE Holdings (BEKE)
In electric vehicles, several Chinese companies are becoming serious rivals to Tesla (TSLA) in the world's biggest auto market.
Several Chinese financial firms or brokerages are listed in the U.S.
Several China stocks are in solar power.
For-profit education Chinese stocks are a notable nontech sector.
- New Oriental Education (EDU)
- TAL Education (TAL)
- Gaotu Techedu (GOTU), formerly known as GSX Techedu.
IBD Digital: Unlock IBD's Premium Stock Lists, Tools And Analysis Today
China Stock Investing Via ETFs
One way to minimize individual China stock risks is via ETFs. Another advantage of buying ETFs is that a growing number of Chinese companies are listing in Hong Kong or Shanghai, instead of or in addition to the U.S.
KraneShares CSI China Internet ETF (KWEB) tracks major Chinese internet companies. Many Chinese stock holdings in the KWEB ETF are U.S. listed or traded, such as Alibaba stock, JD.com, Tencent, Pinduoduo and Bilibili, but KWEB also holds companies listed on Chinese markets. Direxion Daily FTSE China Bull (YINN) is a three-times-leveraged ETF of the 50 largest companies listed in Hong Kong, including Alibaba, JD.com and Tencent stock, but its biggest weights are in financials. (The Direxion Daily FTSE China Bear (YANN) is a three-times-leveraged ETF shorting Hong Kong's biggest companies.)
Stock Market Trend Key
As always, investors should be following the overall stock market trend. Right now the stock market is in a correction.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Best China Stocks To Buy: Key Ingredients
Focus on the best stocks to buy and watch, not just any Chinese company.
IBD's CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
Look for companies that have new, game-changing products and services. Invest in stocks with recent quarterly and annual earnings growth of at least 25%.
Start with companies with strong earnings growth. If they're not profitable, at least look for rapid revenue growth. The best China stocks should have strong technicals, including superior price performance over time. But we'll be highlighting stocks that are near proper buy points from bullish bases or rebounds from key levels.
Chinese stocks outperformed in the spring, but have struggled lately.
Why This IBD Tool Simplifies The Search For Top Stocks
Best Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| Li Auto | LI | Auto Manufacturers | 51 |
| Baidu | BIDU | Internet-Content | 36 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| Nio | NIO | Auto Manufacturers | 23 |
| Pinduoduo | PDD | Retail-Internet | 92 |
So let's analyze these five top China stocks: Li Auto stock, Baidu stock, BYD stock, PDD stock and NIO stock.
Li Auto Stock
Li Auto is one of several Chinese electric-vehicle makers that trade in the U.S., competing with each other and Tesla (TSLA).
The automaker delivered just 4,577 hybrid SUVs, down 56% vs. July and 52% vs. a year earlier. The just-released L9 is cannibalizing Li One sales, the company has said, with the scaled-down L8 coming in November. The Li One will be discontinued in October.
Li Auto began deliveries of the more-upscale L9 hybrid SUV on Aug. 30. The company has high hopes, predicting 10,000 deliveries of the model in September.
On Sept. 22, Li said it would hold an early launch event on Sept. 30 for the L8, which set to begin deliveries in early November.
Li Auto also teased the L7 and L6, two more hybrid SUVs. The L7 will launch in Q1 2023. The smaller L6 will be Li Auto's most affordable vehicle, expanding the market but also facing new competition.
On Sept. 26, Li Auto said it expects Q3 deliveries of 25,500, down from its prior target of 27,000-29,000 hybrids, citing supply-chain issues. That implies September deliveries of about 10,500 vehicles, given that it delivered 10,422 vehicles in July and 4,571 vehicles in August.
Li Auto will likely release September deliveries on Oct. 1.
Shares sold off hard in the spring. Li stock bounced following Q1 earnings on May 10 and reclaimed its 50-day line in late May. It recently gapped above its 200-day line and then kept running.
Shares ultimately more than doubled to a 52-week high of 41.49 on June 24. LI stock has since broken below its 50-day line and has retreated well below its 200-day line, at the worst levels in nearly four months.
Shares bounced late last week on the L8 launch event announcement and hints of future models. LI stock extended gains on Sept. 26 despite the Q3 deliveries guidance cut.
The automaker has a dual listing on the Hong Kong exchange.
Li Auto stock has a 51 IBD Composite Rating out of a best-possible 99.
Bottom line: Li Auto stock is not a buy.
Baidu Stock
Baidu is China's top search giant. It also has big ambitions in the autonomous driving space. Earnings fell in 2021 and are expected to decline this year before rebounding in 2023.
Baidu earnings fell about 1% in Q2 vs. a year earlier but beat views. Revenue fell 5%, beating some consensus forecasts but missing others.
Shares hit a two-year low in May, but bounced back before sliding from a short-term high in late June.
On Aug. 8, Baidu said it received approval from Wuhan and Chongqing to charge passengers for its ride-hailing service without a safety driver in designated areas.
Baidu is part of a Jidu joint venture with Volvo parent Geely. They'll release the highly autonomous Robo-01 SUV next year.
Baidu blasted above its still-falling 50-day and 200-day moving averages on Aug. 25 on the U.S.-China audit deal.
That could have been seen as an early entry to a bottoming base with a 156.87 buy point, but it came just before earnings on Aug. 30.
Shares sold off on earnings, plunging below its 50-day and 200-day lines, closing below those levels on Sept. 2. BIDU stock has dived well below the lows of its recent consolidation.
Bottom line: Baidu stock is not a buy.
BYD Stock
BYD is the biggest Chinese EV maker. It makes EVs, plug-in hybrids as well as electric buses and heavy equipment. It's also a major EV battery maker.
Notably, BYD is profitable, though it was subdued in 2021 as capital spending surged to power the company's ongoing expansion.
First-half net income was 3.598 billion yuan. That was at the high end of the EV giant's July 14 preliminary first-half estimate of 2.8 billion-3.6 billion yuan.
On Sept. 3, BYD reported record August sales of 174,915 EVs and plug-in hybrids, up 185% vs. a year earlier and 7.6% above July's 162,530. Sales of pure electrics were 82,678 units, up 172% vs. a year earlier. PHEV sales leapt 203% to 91,299 units.
In early October, BYD will report September and third-quarter sales. Both should be new records, with Q3 deliveries topping 500,000.
Q2 sales surged to 355,021 NEVs, booming 256% vs. Q2 2021 and 24% above Q1's 286,329. BYD roared past Tesla vehicles sales — by 100,000. Tesla still leads in all-electric vehicles, with BYD selling 180,296 passenger EVs in Q2.
BYD largely avoided production hiccups amid China's Covid lockdowns, helped by its in-house battery and chip operations.
The automaker has conservatively targeted at least 1.5 million in unit sales this year, but appears to be on track to finish well above that.
BYD has just begun deliveries of the Seal sedan, a Model 3 rival that's $10,000 cheaper.
On Sept. 28, BYD will hold its European launch event, with deliveries of the Tang SUV, Han sedan and small crossover Atto 3 starting in many countries in the fourth quarter. BYD has been selling the Tang in Norway in limited numbers since late 2021. Nio also will launch in Europe soon.
BYD has started some Atto 3 deliveries in New Zealand and Australia. The Atto 3 is the Yuan Plus' name for most overseas markets.
The EV giant will enter Japan with the Atto 3 in early 2023, the Dolphin/Atto 2 mid-year and Seal/Atto 4 in late 2023.
BYD is increasing its sales in Latin America, ramping up in Brazil in particular.
Exports rose to a record 5,092 in August from July's 4,026. That figure should surge in the next few months.
BYD announced a deal to build an auto plant in Thailand, with production set to begin in 2024. BYD's first auto plant outside China will be used for export. Thailand and many of BYD's new markets are right-hand drive countries.
The China EV giant will unveil a high-end brand in the third quarter and roll out its first model in the fourth quarter. The brand will target the luxury market for 1 million ($145,520) yuan or more, starting with an off-road SUV.
BYD's 90%-owned Danza unit has just launched a minivan in the affordable luxury space, with deliveries likely starting in September. A Danza SUV is expected to be unveiled soon. Mercedes-Benz owns 10% of Danza.
BYD has begun supplying Blade batteries to Tesla Berlin. The Tesla deal is a major validation for BYD as a battery supplier to third-party automakers.
Toyota (TM) will use BYD batteries and motors in an upcoming small EV for the Chinese market, the bZ3. BYD may be actively involved in Toyota's wider EV push in the coming years.
Stocks hit a multimonth low on March 14 but rebounded powerfully. BYD stock broke out past a 39.81 buy point on June 27.
But shares have struggled in the past two months amid rumors that Warren Buffett's Berkshire Hathaway (BRKB) was selling some or all of its stake.
A Hong Kong exchange filing on Aug. 30 showed that Berkshire sold 1.33 million H-shares on Aug. 24. On Sept. 1, Berkshire sold 1.72 million shares Berkshire bought 225 million H-shares in BYD in September 2008. Berkshire owns slightly less than 8% of BYD, based on all share classes.
It's unclear if this is the extent of Buffett's BYD sales or just the start of a major scaling out.
BYD stock plunged 19% for the week on the Buffett sales, as investors ignored positive business news and comments. Shares haven't bounced back, trading near four-month lows.
BYD is listed in Hong Kong and trades over the counter in the U.S. The BYDDF stock chart is prone to lots of little gaps up and down.
Cathie Wood's Ark Invest has a small stake in BYD.
Bottom line: BYD stock is not a buy.
Tesla Vs. BYD: China Rival Seizing EV Crown
Pinduoduo Stock
Pinduoduo is the No. 3 e-commerce player in China, after Alibaba and JD.com. Pinduoduo plans to open up some U.S. e-commerce operations.
Pinduoduo earnings crushed views before the open on Aug. 29. Adjusted EPS leapt 156% vs. a year earlier to $1.13, beating by 73 cents. Revenue rose 36% to $4.69 billion, more than $1 billion above consensus.
Alibaba and JD.com are having a tougher time in a struggling economy. But Pinduoduo's bargain-focused operations have gained in popularity.
Meanwhile, Pinduoduo has launched its global online marketplace Temu in the U.S.
On Aug. 25, PDD stock jumped above its 50-day and 200-day lines, offering an early entry in a bottoming base with an official 68.81 buy point.
Shares skyrocketed Aug. 29 on earnings, briefly topping the buy point before retreating to close up 15%, modestly below the buy point.
PDD stock kept soaring into early September, rising as rivals and many other Chinese firms sold off.
Shares traded around the buy point for a few weeks before recently falling back to its 21-day line. PDD is now undercutting that level and near its 50-day line. That could provide an area of support.
Bottom line: PDD stock is not a buy.
Nio Stock
While not as large as the diversified, profitable BYD, Nio is the most established of the Chinese EV startups. Nio has four electric vehicles, the ES8, the ES6, the crossover EC6, the luxury ET7 sedan and now the ES7 SUV.
On Sept. 7, Nio reported a wider-than-expected second-quarter loss, though revenue topped with a 22% gain. But the EV maker guided low on Q3 revenue. It see deliveries of 31,000-33,000. That seems easily attainable. Nio already delivered just over 20,700 in July-August, while just launching a new EV and another on the way.
Nio delivered 10,677 vehicles in August, up 82% vs. year earlier and up 6% vs. July. That includes some ES7 SUVs, which started deliveries on Aug. 28.
The ET7 sedan, its third new EV this year and fifth model overall, will follow on Sept. 30.
In addition to its three new EVs, Nio plans to upgrade its pre-2022 models, the ES8, ES6 and EC6.
In the Q3 earnings call, Nio said it expects production to ramp up in Q4, with record deliveries every month in the quarter.
Down the road, Nio has plans to introduce a cheaper sub-brand, and possibly an even-cheaper third brand.
Nio is embarking on a big capacity expansion, and has major international ambitions, including entering the U.S.
Nio is sending its first ET7 sedans to Europe, as it looks to expand the European markets it serves.
Shares peaked at 66.99 in January 2021, tumbling to a low of 30.73 on May 13. Shares rebounded through June, but then began sliding again, hitting 52-week lows in May.
Nio stock rebounded back toward its 200-day line, but slid with other China EV makers in July.
Shares retreated following EV deliveries data, China Covid restrictions and overall market weakness. But Nio stock rose back toward the 50-day line following Q2 results and guidance.
Nio has a bottoming base with a 24.53 buy point that formed below the 200-day line. However, a breakout would require clearing the 200-day line, which could be used as an early entry.
Nio stock vaulted 13.5% on Sept. 12, then touched its 200-day line the next day. Shares have pulled back, diving below their 50-day line.
Bottom line: Nio stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE:
Catch The Next Big Winning Stock With MarketSmith
Best Growth Stocks To Buy And Watch
Best Chinese Stocks To Buy And Watch
How To Invest In Electric Vehicles
S&P 500 Undercuts Bear Market Low As Yields Race Toward 4%; What To Do
The post 5 Best Chinese Stocks To Buy And Watch appeared first on Investor's Business Daily.
from Investor's Business Daily https://ift.tt/TcsBzyI