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 those with strong earnings growth, such as Pinduoduo stock. If they’re not profitable, at least look for rapid revenue growth as with Xpeng. 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 in general are out of favor now, with the possible exception of EV stocks. While Chinese electric vehicle makers are not immune to regulatory pressures, Beijing appears to want to foster the domestic industry.
Best Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| Li Auto | LI | Auto Manufacturers | 60 |
| NetEase | NTES | Computer-Software Gaming | 53 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| JD.com | JD | Retail-Internet | 53 |
| Xpeng | XPEV | Auto Manufacturers | 35 |
So let’s analyze these five top China stocks: Li Auto stock, NetEase stock, BYD stock, Xpeng stock and JD.com 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).
Flirting with profitability, Li Auto has seen huge sales growth from its one current model, the Li One SUV. The Li One is actually a hybrid, with a small gasoline engine to extend its range.
Beijing-based Li Auto delivered 14,087 Li One hybrid SUVs in December, up 130% vs. a year earlier. Q4 deliveries hit 35,221, well above its 30,000-32,000 target and Q3’s 25,116.
Li Auto will release January sales soon, likely on Feb. 1.
After a huge run from its July 2020 IPO to a record 47.70 on Nov. 24, 2020, Li Auto stock plunged to 15.98 in May.
Shares broke out in early December from a late 2021 bottoming base within that larger consolidation, but that quickly failed. Li Auto quickly plunged below its 50-day line, finding support around its 200-day.
Li Auto stock reclaimed its 50-day line on Jan. 14, but fell back below that level on Jan. 18 and below its 200-day line on Jan. 21. On Jan. 25, shares hit a seven-month low.
Li Auto has a dual listing on the Hong Kong exchange.
Li stock has a 60 IBD Composite Rating out of a best possible 99.
Bottom line: Li Auto stock is not a buy.
NetEase Stock
NetEase is a Chinese mobile gaming giant.
It’s profitable, but growth has been spotty in recent quarters amid a Chinese government crackdown on video games. NetEase earnings rose 13% in the third quarter vs. a year earlier, with revenue up 25%. For the full year, analysts expect 21% EPS growth, with 18% in 2022.
NetEase stock, like many other Chinese internets, has struggled over the past year. NTES stock peaked at 134.33 in February 2021, tumbling to 77.79 last August. Shares rallied to 118.19 on Nov. 22, right as the Nasdaq peaked, then tumbled back below its 50-day and 200-day lines.
Shares have tried to move above those key levels, but are below them right now. Still, NTES stock is holding up better than most Chinese internet firms.
If NetEase stock can get back above the 50- and 200-day lines, it will likely have a bottoming base with a 118.29.
Bottom line: NTES stock is not a buy.
BYD Stock
BYD Co. is the biggest pure-play Chinese EV maker, making electric cars and buses, as well as many hybrids. It’s also a major EV battery maker. Warren Buffett’s Berkshire Hathaway (BRKB) is a longtime investor.
Notably, BYD is profitable, in sharp contrast to Li Auto, Nio and Xpeng Motors. BYD’s Q3 profit fell vs. a year earlier, while revenue rose modestly.
BYD sold 93,945 new energy vehicles in December, up 218% vs. a year earlier. That was up from 91,129 NEVs in November, but snapped a six-month streak of EV/hybrid sales rising by roughly 10,000.
China’s strict lockdown of Xi’an province affected some BYD production in December, but normal operations quickly resumed.
Of the 93,945 vehicles sold, 92,833 were personal vehicles, up 232% vs. a year earlier. EV sales reached 48,317, up 155%, while plug-in hybrid sales leapt 477% to 44,506.
BYD continues to slash sales of its traditional gas-powered cars. They fell to 5,167 in December vs. 27,481 a year earlier.
BYD will release January sales in early February.
Toyota reportedly will make a small EV car for the China market in late 2022, using BYD Blade batteries. It’s possible that BYD will play a big role in Toyota’s new, sweeping EV push in the coming years.
BYD reportedly will unveil a new premium brand in the first half of 2022, starting with a luxury SUV crossover.
Like Nio and Xpeng, BYD has begun selling EVs in Norway, starting with the Tang SUV. Exports are likely to be a big part of BYD’s future, as production continues to ramp up sharply. BYD is gearing up to sell EVs in Australia.
Meanwhile, BYD Semiconductor has won regulatory approval for an IPO listing in Shenzhen.
BYD stock corrected nearly 52% from its January peak of 35.94 to its May 12 low of 17.41.
Shares broke out of a double-bottom base with a 35.35 buy point in Oct. 15, then kept running. BYD stock hit a record 41.24 in early November, but sold off, tumbling below the 50-day line. Shares closed below their 200-day line on Jan. 24 and tumbled again on Jan. 28.
BYD is listed in Hong Kong and trades over the counter in the U.S. So the BYDDF stock chart is prone to lots of little gaps up and down. But it also means that BYD is at not at threat of a U.S. delisting.
Bottom line: BYD stock is not a buy.
Xpeng Stock
Xpeng makes the G3 small SUV, the P7 sedan and the smaller P5 sedan. The P5 sedan, officially launched in mid-September, is the first production car to come with Lidar. On Nov. 12, Xpeng unveiled the G9 SUV, saying it’s targeted for international markets. The fast-charging SUV is due to launch in Q3 2022. Xpeng sells some G3 SUVs in Norway, and is expanding that to include some P7 sedans.
Xpeng deliveries shot up 181% to 16,000 vehicles last month, a new record after November’s 15,613. For the quarter, the Guangzhou-based startup delivered 41,751 vehicles, easily beating its Q4 target of 34,500-36,500 and vaulting above Q3’s 25,666. That included 7,459 P7 sedans, 5,030 P5 cars and 3,511 G3 and G3i smart SUVs.
Xpeng will release January sales soon, likely on Feb. 1.
XPEV stock peaked at 74.49 in November 2020, nearly tripling from an IPO base. Shares then tumbled to 22.73 in May. But after rallying for a time, Xpeng stock formed a bottoming base, with a 48.08 buy point, with 50.50 as an alternate entry.
After trading above and below that entry for several weeks, Xpeng stock roared back above the 48.08 entry on Nov. 23 following earnings. Shares reversed lower on Dec. 1 following November deliveries. XPEV stock then plunged with EV peers on Dec. 2.
Shares sold off again on Dec. 3, diving below the no-longer-valid buy point and even the 50-day line.
XPEV stock reclaimed its 50-day line in the week ended Jan. 14, and just crossed a trendline entry. But shares have tumbled to below the 200-day line and beyond.
Bottom line: Xpeng stock is not a buy.
JD.com Stock
JD.com is a Chinese e-commerce giant. It’s showing a bit more fight than rivals such as Alibaba.
JD.com earnings fell 2% in the latest quarter, while sales grew 32% to $33.9 billion. But that topped views, unlike many China internets, including Alibaba.
JD.com stock peaked at 108.29 on Feb. 17, 2021 and bottomed at 61.65 on July 25. Shares hit a multi-month high in November, but then tumbled until early January.
On Dec. 23, shares fell hard after Tencent Holdings (TCEHY) said it’ll slash its stake in JD.com to 2.3% from 17%, giving the shares to its investors. The two internet giants will maintain close business ties.
Shares gapped above their 200-day and 50-day lines on Jan. 20, as many Chinese internet giants rallied on monetary stimulus and other reported moves. But JD.com stock fell right below that key level on Jan. 21.
JD.com was added to Hong Kong’s Hang Seng Index in December.
Bottom line: JD.com is not a buy.
PetroChina Company Limited PTR provides a wide range of petroleum-related products and services in China. In fact, it is the largest integrated oil company in Mainland China. Being an integrated oil firm, PetroChina is well-poised to capitalize on the growing demand for natural gas. At the same time, PetroChina’s upstream segment is likely to benefit in the near term from a steady rise in oil prices.
PetroChina currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved up 5.9% over the past 60 days. PetroChina’s expected earnings growth rate for the next year is 4.1%. For the next five years, its projected earnings growth rate is 50.8%.
ZTO Express (Cayman) Inc. ZTO provides various logistic services, including express delivery in the People’s Republic of China. ZTO Express is headquartered in Shanghai and mostly delivers parcels weighing below 50 kilograms. With the rapid growth in e-commerce business, ZTO Express’ parcel volume has increased in recent times. Additionally, ZTO Express’ freight forwarding services are contributing toward its revenue growth.
ZTO Express, at present, has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved up 10.1% over the past 60 days. ZTO Express’ expected earnings growth rate for the next year is 33.3%. In reality, for the next five-year period, its projected earnings growth rate is 18.2%.
Dingdong (Cayman) Limited DDL is principally an e-commerce company operating in China. Dingdong (Cayman) provides meat, seafood, and other necessary daily items. Dingdong (Cayman) primarily operates its online retail business through Dingdong Fresh. Thanks to the companies’ advanced supply-chain capabilities, Dingdong is one of the fastest-growing companies in the retail space in China.
Dingdong (Cayman) currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved up 41.6% over the past 60 days. Dingdong (Cayman)’s expected earnings growth rate for the next year is 50.7%. For the next five-year period, its projected earnings growth rate is 46%.