Back when the Internet phenomenon was exploding, it was popular to have ".com" in your company name, or to sport the letter "e" when e-commerce hit the big time. Thus were born viable business stories like Amazon.com
China is apparently the new "dot-com." A simple check of Yahoo! Finance reveals more than 200 companies with the word "China" in their names. And while a few seem like viable entities, like China Mobile
Both of The Motley Fool's co-founders believe in the potential for a market economy in China, albeit not a capitalist one. David Gardner recommended Chinese Internet portal Sina
Although I'm not convinced that the time is right yet for investment in China -- I find the possibility of government rule-changes in the middle of the game an all-too-real risk -- plenty of other Fools disagree. Still, investors shouldn't rush in simply because a company touts itself as having some Chinese connection.
Consider Comet Technologies, a company that until recently had no operations. Through a reverse merger, it acquired a tiny "pharmaceutical" business that markets Chinese herbal remedies and changed its name to China Sky One Medical, "to better indicate our ties to China." Amazingly, this company's stock has traded sporadically on the Pink Sheets for more than a decade, even though it made no products, had no services to offer, and had no revenues. Now, with a "Chinese connection," it may attract even more investor attention, warranted or not.
Growing concerns with actual business models have made it difficult enough to navigate the uncharted territory of Chinese regulatory mandates. A ruling from China's Ministry of Information unilaterally decided to impose rules on how and when companies can impose monthly subscription fees, causing China Mobile to change its policies. The ruling is also expected to negatively affect both Sina and TOM Online over the short term. Google drew much-deserved derision for its move to play nice with the Chinese government by limiting free-speech content on its China-specific search engine.
Usually, you can tell which trend is the flavor of the month just by scanning the junk mail that arrives at your doorstep or lands in your email inbox. Investing should not mean jumping onto the latest fad. Don't let the newest dot-com become the latest dot-bomb that decimates your portfolio.
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Sina, Amazon, and TOM Online are recommendations of Motley Fool Stock Advisor . Ctrip.com is a recommendation of Motley Fool Hidden Gems . A 30-day guest pass lets you check out all of the Motley Fool's market-beating newsletters.