Investors continue to struggle in relation to the direction of the world’s second largest economy. China’s growth has slowed in the past few years, pulling stocks lower. While many pundits have written off investing in the stocks from the country, others see its troubles being transitory in nature. For investors looking for nearer term catalysts, these GDP figures may prove persuasive towards certain Chinese stocks to buy.
Beyond that, investors can look to domestic macroeconomic forces as a reason to believe in Chinese equities. Recent signs of a cooling labor market stoked hopes for rate cuts pushing Chinese shares higher in the process.
All of the news is suggestive of the idea that fear surrounding Chinese stocks is overblown. For investors willing to back that notion, these Chinese stocks to buy arestrong choices.
PDD Holdings (PDD)
PDD Holdings (NASDAQ:PDD) is one of the strongest Chinese stocks to buy on the strength of its Temu business segment.
Overall, PDD Holdings grew by nearly 90% in 2023 on a top line basis. The company saw its bottom line grow by a similar rate during the same period. Meanwhile, the company is expecting approximately 50% growth this year. It is squarely in the hyper-growth category and continues to be undervalued due to its origins.
Forward earnings are priced at below 16. That is lower than the current price for a dollar of earnings suggesting that analysts believe the share price will rise in the future.
The company has a real winner on its hands with Temu. It has become one of the most popular apps available.
The stock is also one of the best performing Chinese stocks over the past year. As you may have suspected, grouping of equities has performed quite poorly overall. PDD shares are one of few exceptions for good reason.
Baidu (BIDU)
Allow me to offer a simple but powerful narrative about Baidu (NASDAQ:BIDU) and its stock. Investors who follow the logic are likely to quickly recognize the inherent value of investing in the company at this moment.
In 2023 Baidu’s revenues increased by 9% while net income nearly tripled, rising 169%. Yet, share prices have fallen by more than 6% over the last 12 months. There’s an inherent disconnect between the two suggesting a lot of value in Baidu’s shares at the moment.
If that simple but powerful narrative is not compelling enough then also consider artificial intelligence. Baidu’s AI chatbot tool currently has more than 200 million users. The company is considered to be the Chinese equivalent of Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google, mirroring the company in many ways.
It’s that combination of undervalued pricing and artificial intelligence potential that makes Baidu particularly compelling as an investment. It’ll remain one of the best Chinese stock opportunities through the current tense period characterizing markets.
Li Auto (LI)
It’s exceedingly easy to find reason to be bearish about Li Auto (NASDAQ:LI) and other Chinese EV stocks.
The Chinese domestic EV market is slowing while competition heats up. There are now more than 100 domestic EV producers. That will put downward pressure on vehicles from leading firms including Li Auto.
Furthermore, the Biden Administration is considering increasing tariffs on Chinese EVs in the run up to the election. American protectionism is another negative sign which could easily galvanize investors to avoid Chinese EV stocks altogether.
Yet, there are compelling reasons to consider Li Auto in particular as perhaps the best Chinese EV stock. The company is the first in its segment to turn a profit. The company produces primarily hybrid vehicles. The fact that it reached profitability first provides a strong use case for hybridization as the best overall strategy.
The company’s April delivery figures were flat Li Auto will commence large-scale deliveries of its plug-in hybrid electric L6 model in May. There’s a lot to look forward to.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
