Identifying Value Opportunities in China

Over the past several weeks, the financial industry has been obsessed with data coming out of China.  While the vast majority of the news points to a slowing economy, there are many value opportunities to exploit while the Chinese markets are under pressure.  

An 18th century British nobleman, Baron Rothschild after the Battle of Waterloo famously stated, “The time to buy is when there’s blood on the streets.”  This highlights the contrarian view, of buying when things look bad to improve your profit levels.  Given the sustained downturn over the past few months, it would be worthwhile to look for any value opportunities to be had in the Chinese market.

But how do we limit some of the risk by investing overseas during a down market?  We look into ADR’s; American depositary receipt, a stock that trades in the U.S. but accounts for a specific amount of shares in a foreign company.  These ADR’s are issued by a U.S. bank or brokerage company, and act just like regular American stocks.  This eliminates any foreign issues, and reduces the complexity of cross country trades (think foreign taxes, and administration costs).  

What Investors Tend to Get Wrong

Without utilizing research platform investors tend to have a scatter gun approach and miss out on finding the best opportunities available worldwide. If you are not looking at specific items like ADR, and or Country Code your search will be limited to the U.S., and you will miss out on opportunities outside the Americas.  The undisciplined approach does not allow the investor to examine all the best investment options that are available worldwide.    

How to Best Find New Opportunities

By adding key factors like Zacks Rank, and Zacks Style Score the investor is able to better narrow down well performing companies.  Further, by combining key items with the Zacks factors, a savoy investor can isolate the best and brightest stocks.

To identify what foreign opportunities are available, I have built a solid screen that marries fundamentals with Zacks Rank and Style scores.  

Screen Parameters

• 
  Domiciled Country Code:  CHN

(This gives us Chinese companies.  Also, you can look at any country by utilizing the drop down menu to choose which country code you wish)

• COM/ADR/Canadian = ADR

(This will give us companies that are ADRs)

• Zacks Rank < 3

(No Sells, or Strong Sells)

• Value Score < B

(To track the recent trend of the stock. Screen will only grab A’s and B’s that have the highest probability of success)

Stocks

This screen produced 34 stocks.  Here are 5 stocks that made this week’s screen

JA Solar Holdings (JASO - Analyst Report)

Concord Med (CCM - Snapshot Report)

Renesola Lt (SOL - Analyst Report)

Weichai Power (WEICY - Snapshot Report)

Yingli Green Energy (YGE - Snapshot Report)

Each pick has significant potential.  Yet the entire list is worth a thorough analysis.

Given the current world market situation, it is very unnerving for the regular investor to find safe and profitable companies.  But with the assistance of Research Wizard, all investors can identify top stocks in any market environment.

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by Brian Hamilton

- Source: http://www.zacks.com/commentary/73329/identifying-value-opportunities-in-china#sthash.ZHjDShub.dpuf