I can't be the only one waiting for 2009 to begin to give my portfolio a new chance to shine. One market that should bounce back nicely when the equity markets recover is China. Its stocks have been pummeled, even though the economy of the world's most populous nation is holding up substantially better than the rest of the world.
I took a look last week at the one search engine I would like to own heading into the Year of the Ox. This time I'm going to take a look at China, with an emphasis on the online stocks that I cover. China's leading Internet plays offer attractive valuations and typically more promising growth prospects than their stateside peers.
China gets wired
Just because I'm going to single out my top dot-com picks in China doesn't mean that the rest of the sectors don't offer compelling opportunities. There are certainly some compelling arguments to buy into advertisers, insurers, and infrastructure plays.
However, China's migration into cyberspace is early enough in its growth cycle to blow you away. China's audience of Internet users topped the United States' to take top honors over the summer, and we're still talking about only roughly one-fifth of the country being online at the moment.
The runners-up are ...
There are plenty of worthy stock candidates here. We should definitely start with Baidu.com
Baidu commands roughly two-thirds of the country's search queries, so it had little choice but to clean up its act. It booted the errant sponsors, and the next few quarters will be critical in determining the incident's financial impact in both advertiser spending and visitor usage.
The black eye is enough to keep Baidu out of gold medal contention, but it doesn't mean that Baidu won't be a huge winner. The stock is now trading at just 19 times next year's projected profitability. That's not too shabby for a stock that is expected to grow earnings by 91% this year and 37% in 2009.
Another runner-up that has stumbled lately is Ctrip.com
China Finance Online
There are other ways to play the dot-com boom. Telco heavies like China Netcom
And the winner is: Sohu.com
The best bang for your buck -- or yuan -- at the moment has to be Sohu.com
It is on the multiplayer gaming front where Sohu has been a rocket lately, helping revenue and earnings soar 134% and 316%, respectively, in its latest quarter. Unlike other dot-com bellwethers like Baidu and SINA
Wall Street now sees Sohu earning $3.77 a share this year, and $4.53 in 2009. It's hard to pass on Sohu these days while it's trading at 10 times next year's projected net income.
Whether Sohu or one of the many runners-up catches your eye, now is the time to position yourself for the eventual Chinese stock market recovery.
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Ctrip.com International is a Motley Fool Hidden Gems recommendation. China Finance Online and Baidu.com are Motley Fool Rule Breakers picks. SINA is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.
Longtime Fool contributor Rick Munarriz is a huge fan of China's growth stocks and has recommended several as newsletter picks. He does not own shares in any of the stocks in this story. Rick is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.