Five Must-Own Stocks for the Yearend Rally

Robert Hsu, November 17, 2009

In this Issue:

Three Reasons to Bet on the Yearend Rally
Four Ways to Start Profiting Today
One More Profitable Opportunity

Three Reasons to Bet on the Yearend Rally

Earnings season is winding down. But what an earnings season it has been!

Third-quarter earnings season started off with a bang, as the majority of companies reporting during the first couple of weeks blew expectations out of the water. While the earnings surprises and better-than-expected results tapered off a bit as the weeks drug on, overall it's been a very positive earnings season.

As of mid last week, of the 85% of S&P 500 companies that had reported, 83% had walloped analysts' estimates. As a result, the S&P 500 has rallied 8% since early October.

But what's great is that Chinese stocks have done even better! In fact, during the weeks that U.S. companies were reporting lackluster earnings and spooking investors, Chinese shares continued to press higher. This move was fueled by excess liquidity and robust earnings growth.

This was particularly apparent in trading on October 30 when the Dow shed 250 points, or 2.5%, but the Shanghai market gained 1.2%. Since then stocks traded in Shanghai have continued to push higher, surging nearly 11% in the past three weeks!

Adding fuel to this rally has been incredible earnings results from a number of the Chinese companies that we discussed in recent weeks during our sector series. But before we take a closer look at five Chinese companies that reported robust earnings and have shot higher in the past few trading days, let me just say that I think the recent move higher in Chinese shares is just the beginning of a new period of outperformance for Chinese companies in the weeks ahead.

In fact, as we discussed last week, I'm expecting Chinese shares to outperform through yearend. The U.S. market will likely consolidate a bit in the coming weeks and stay within a 500-point trading range -- though, there' still a strong likelihood of 5% upside. On the other hand, I expect Chinese shares to tack on at least another 10% to 20% upside by yearend.

How is this possible? Three things…

Typically, September to October is a weak period for stocks, and then they push higher into the strong holiday months. We're already seeing this occur in Chinese shares as they've only trekked higher since October 29.
China's economy continues to show strength, now growing 10% from year-on-year levels.
And the global economic picture is improving, with better-than-expected economic growth out of the U.S. and most Asian nations now bouncing back strongly.

Now, this isn't to say that only way is up because there will likely be some blips along the way -- even the strongest bull market cannot move straight up. But the overall trend is up, and there are some specific Chinese companies that I think will continue to tack on gains through yearend.

This yearend rally is an incredible opportunity for China investors, and I don't want you to miss out! Take advantage of my special $99 offer to join China Strategy today, and rest assured that you'd be invested in the best Chinese companies set to profit from the next leg higher.

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