Investing World Cup: China Rebuttal

Jim and I agree on two things. The first is that there's greater risk in buying into China than in loading up on our trusted pals in Western Europe. Yet Jim also concedes that the greatest investing idea for the next 10 years is much more likely to come out of China than out of Europe.

In other words, he compares investing in China with buying a lottery ticket, but the reality is that only the best of the region's stocks are trading publicly at the moment. So it's a lottery ticket with decent odds, as opposed to Western Europe, which is a lottery ticket where the payoffs are small in comparison.

"Much of China is disqualified simply on a valuation basis," Jim writes, arguing that a lot of China's uber-growth has been baked into the seemingly stratospheric share prices. The problem, Jim, is that you're baking with one of those Easy Bake Ovens. Reality couldn't be further from your bogus truism.

Let's take a look at some China's more popular stocks:

In terms of next-year multiples, this isn't all that different from sampling a collection of sleepy stocks in Western Europe. The real kicker comes in the final column, where you find stocks that are all growing faster than their forward P/E ratios.

Baked in? The only thing that I see baked is Jim's argument that China's valuations are out of whack. It's not often you find that one of the more exciting stock markets happens to be in the world's most populous nation and that we're just starting to scratch the surface given these cheap valuations.

Au revoir. Adios. Ciao. You know how to say goodbye in the languages of Western Europe. Isn't it about time you learned how to say hello in Mandarin or Cantonese?

China is facing Western Europe in this Investing World Cup match. Go back to the intro page to navigate your way to another part of this contest, and then vote for the region that you think should advance to the next round of the tournament.

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Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin online stocks for a long time. He is a member of the Rule Breakers newsletter team.

This article represents the opinion of one Fool and should in no way be taken as the opinion of either The Motley Fool, Inc., or the company in question, or as representative of anyone or anything other than that specific Fool's thoughts. So before buying, do your homework and review The Motley Fool's superbly sportsmanlike disclosure policy.