In light of the U.S. and China agreeing to phase one of their landmark trade deal, five Chinese stocks that have outperformed the stock market this year are Vipshop Holdings Ltd. (VIPS, Financial), China Distance Education Holdings Ltd. (DL, Financial), China Biologic Products Holdings Inc. (CBPO, Financial), TAL Education Group (TAL, Financial) and 51job Inc. (JOBS, Financial) according to the All-in-one Screener, a Premium feature of GuruFocus.
Dow sets new intraday high as trade optimism strengthens, yet still closes lower
On Monday, the Dow Jones Industrial Average set an new record intraday high of 28,337.49, up 202.11 points from last Friday’s close of 28,135.38. Despite this, the Dow closed at 28,235.89, about 100 points off the intraday high on reports that Boeing Co. (BA, Financial) will suspend its 737 Max production at the beginning of the New Year, sending shares of the aerospace giant down over 4% from the previous close.
Stocks that propelled the Dow earlier in the day included Goldman Sachs Group Inc. (GS, Financial), a major bank holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial).
The National Bureau of Statistics of China said industrial production in November increased 6.2% year over year, topping Reuters’ median forecast of 5% and up 1.5% from the October year-over-year growth of 4.7%.
The U.S. and China announced on Friday that, as part of “phase one” of their trade deal, the U.S. will reduce tariffs from 15% to 7.5% on $120 billion worth of Chinese exports and cancel the 15% tariff on consumer product exports, which would have otherwise gone into effect on Sunday. In return, China agreed to increase purchases of U.S.-based agricultural products.
As such, investors might find opportunities in Chinese stocks as the trade deal comes to a close. The Screener listed five companies that have high financial strength and profitability and have not only returned at least 10% in the year to date, but also outperformed the Standard & Poor’s 500 index benchmark by at least 10% over the past six months.
Vipshop Holdings
Vipshop Holdings has returned 149.63% in the year to date and outperformed the S&P 500 return by 65.94% over the past six months.
The Guangzhou, Guangdong-based company offers branded products to consumers through flash sales on its online platforms, which include Vipshop.com, Vip.com and Lefeng.com. GuruFocus ranks Vipshop’s financial strength 8 out of 10: Even though the company has a poor Piotroski F-score of 3, Vipshop has a strong Altman Z-score of 4.63, robust interest coverage and debt ratios that outperform over 79% of global competitors.
Gurus with large holdings in Vipshop include Sarah Ketterer (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Steven Cohen (Trades, Portfolio).
China Distance Education
China Distance Education has outperformed the S&P 500 by 51.68% over the past six months despite returning just 30.30% year to date.
The Beijing-based company provides professional education in accounting, health care, engineering and construction. GuruFocus ranks the company’s profitability 8 out of 10: China Distance Education’s return on equity has outperformed 95.85% of global competitors despite profit margins contracting over 13% per year on average over the past five years based on loglinear regression.
China Biologic Products
China Biologic Products has returned 54.13% year to date and outperformed the S&P 500 by 19.12% over the past six months.
The Beijing-based company engages in the research, development, manufacture and sale of human plasma-based products through two business segments: Shandong Taibang and Guizhou Taibang. GuruFocus ranks China Biologic’s financial strength 10 out of 10 and profitability 9 out of 10 on several positive investing signs, which include robust interest coverage, a three-star business predictability rank and operating margins that are outperforming over 96% of global competitors despite contracting approximately 6.3% per year on average over the past five years.
TAL Education Group
TAL Education Group has returned 70.61% year to date, yet outperformed the S&P 500 benchmark by just 16.50% over the past six months.
The Beijing-based company provides after-school tutoring programs for primary and secondary school students. According to GuruFocus, TAL Education’s three-year revenue growth rate of 55.08% outperforms over 95.08% of global competitors, suggesting good profitability potential. Despite this, operating margins have contracted approximately 6.5% per year on average over the past five years and are outperforming just 54.90% of global education companies.
51job
51job has returned 38.08% year to date and outperformed the S&P 500 benchmark by 11.38% over the past six months.
The Shanghai-based company offers recruitment training and human resource-related services like outsourcing, campus recruitment and executive search services. GuruFocus ranks 51job’s profitability 9 out of 10 on several positive investing signs, which include a three-star business predictability rank and operating margins that have increased approximately 0.6% per year on average over the past five years and are outperforming 95.12% of global competitors.
Disclosure: No positions.
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