Eastern Gems

• Email
• Share
• Print

The potential of China has rarely been disputed. As the world's most populous nation, the only real question has been when the country will get up to speed with the rest of the world and whether or not most of its residents will reap the benefits of modernization.

But Internet companies aren't known for their patience. They are ready to buy into the future now. Last week it was Amazon (Nasdaq: AMZN) acquiring online retailer Joyo.com. Earlier this year eBay (Nasdaq: EBAY) scooped up Chinese auction site EachNet. Yahoo! (Nasdaq: YHOO) didn't buy SINA (Nasdaq: SINA), but it did team up with a popular Chinese portal to launch an auction site earlier this year.

SINA, along with rivals NetEase.com (Nasdaq: NTES) and SOHU (Nasdaq: SOHU), offer an interesting collection of volatile equities. Over the summer I argued that all three possessed bargain valuations, despite the obvious political and economic risks.

While the companies have had to reshuffle their priorities as the wireless premium services market has taken a hit, they are still growing. With fat margins and neglected share prices, one could argue that they are also worthy Hidden Gems candidates.

Yes, there are plenty of compelling stateside opportunities for the newsletter to consider. Going by some of its winners, such as the near tripling of last year's Middleby (Nasdaq: MIDD) selection, one can argue that you don't really have to venture beyond your own borders to find great stocks.

While that's true, with the clear mandate this year that American companies are interested in buying up Chinese online players, it seems to give the undervalued portals another potential catalyst to get their share prices climbing again. After all, in mining for gems, it's important to remember that many of the world's greatest jewels have been unearthed overseas.

Do you invest exclusively in stateside companies, or do you favor having some global diversification? Are the Chinese portal upstarts really worthy to be singled out as Hidden Gems ? Why China? All this and more in the China Connection discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz thinks that current passports make better investors. However, he does not own shares in any of the companies mentioned in this story.