Hot markets are tricky. When a country or sector is in fashion, investors assume that anything -- and everything -- associated with that group is off to the races.

It obviously doesn't work that way. There is no such thing as shooting fish in a barrel. Really. After that initial shot, you've created a hole in the barrel. Water starts gushing out. Fish start flipping and flopping in all different directions. In short order, you've made a mess of what seemed to be a layup of a situation.

This brings me to China. Many people think that any company that is a player in the world's largest nation -- one that is 1.3 billion citizens strong and growing at a feverish 10% annualized rate -- is a winner. That's just not the case. Let me go over a few companies that have made big bets in China that have yet to pay off for investors.

Ninetowns (NASDAQ:NINE)
Even though Ninetowns has been on a tear in recent weeks, it's still trading well below last year's highs. The company once had a good thing going as the leading provider of software to facilitate Chinese imports and exports, but then the government introduced a free version of the software.

If you think that growth is everywhere in China, consider that the company's net revenue fell by a sharp 55% during the latest quarter. The recent run is no doubt tied to the upcoming IPO, although it's clear that to be B2B is not all that it's cracked up to be. Global Sources (NASDAQ:GSOL) is a reasonable coattail play. It's not growing as quickly as Alibaba in B2B, but at least it's growing. Ninetowns, obviously, is not.

Video games and China seem like a potent combination, but if you had followed them to Webzen, you would have come up short. Its stock is trading for less than a third of its all-time high set three years ago. The Korean maker of online video games is making a push in China, but the recent success of its Soul of the Ultimate Nation in China has barely offset declines in the popularity of its flagship MU title.

In the meantime, the market has gotten crowded. Forget the crackdown on Internet cafes by the Chinese government. The economy is improving at a quick enough pace to allow citizens to afford home-based connectivity in metropolitan markets. It's just that Webzen was too early with MU, and apparently too late with Soul of the Ultimate Nation.

You can be a hit in online gaming in China and still come up short. NetEase runs the most popular online game in China. As many as 1.5 million people are playing Fantasy Westward Journey at the same time.

Unfortunately for NetEase, growth has been stagnant lately. This begins to explain why the stock is trading 20% lower than when it peaked 18 months ago, but where are the value hunters? The stock is trading at less than 17 times earnings. You don't find too many market leaders fetching that kind of multiple in unattractive markets, much less a red-hot China.

Global-Tech Appliances (NYSE:GAI)
Healthy economies inspire hopping real estate markets. You've probably seen that with E-House (NYSE:EJ). The Shanghai-based real estate agency has seen its shares nearly triple since bottoming out after this summer's IPO.

Wouldn't it follow that the need for appliances and home-care products should also be on the upswing? It may, but Hong Kong's Global-Tech Appliances isn't cashing in. The stock continues to trade for less than $5 a share. The maker of small appliances and floor-care gear has been prone to spotty profitability. Earlier this month, it announced that fiscal first-quarter revenue would inch just 15% higher. It markets electronics within China, although it's also susceptible to global market pressures on the exporting side. Tough break.

Bringing it all home
Sadly, all coattails aren't cut of the same cloth. Even hot markets have cool stocks. If you don't believe me, just check the stock listings on a day when the market's on fire. You will still find a list of losers and stocks hitting 52-week lows.

So keep an eye on China's laggards. You shouldn't expect them to catch up with their speedier peers. The companies will have to do the right things to earn that spotlight. However, the upside has been paved for them if they are in fact able to get it right.

Oh, and whatever you do, don't try to shoot fish in a barrel again.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.