More or less all of the market is a “buy the dip” opportunity at the moment. Investors have sold off in droves because of risk-aversion, which has left many stocks undervalued. I personally like Chinese stocks, and all of the ones listed here are American Depositary Receipts (ADRs). I’m aware that the country’s political situation is unpredictable and that new lockdowns are in place. However, there’s undoubtedly been an overreaction from most stock market participants.
Morgan Stanley’s (NYSE:MS) Lisa Shalett recently opined: “Worries over China’s growth path and monetary policy have recently hampered equity performance, but investor concerns may be overblown.”
I’m in complete agreement with Shalett. As someone who understands investors’ overreaction to the ups and downsides, I can tell you that Chinese equities will surge once investors start acting rationally.
JD (JD)
Independent Research firm Hedgeye suggested earlier this month that investors should long JD (NASDAQ:JD) stock. The research provider’s central argument is that Tencent’s (OTCMKTS:TCEHY) recent JD divestment allows the latter to focus on profitability and efficiency rather than having to put synergies on a pedestal. Hedgeye could have a valid point. However, there are some other fundamental points which also need to be considered.
From a top-down vantage point. The Chinese economy is one of the few global economic forces that isn’t faced with a high inflationary environment (2.1%). Thus, it’s inevitable that the nation’s consumer base will enter an upward trough once their pandemic lockdowns get eased, in turn, giving rise to the consumer discretionary industry. JD will most likely benefit from such an event, which could see its stock price reach its fair market value.
JD stock is undervalued, with its enterprise value-to-sales ratio trading at a mere 0.41x. Additionally, the stock has shed more than a third of its value in the past year, providing a lucrative entry point to investors looking for cheap Chinese stocks to buy.
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