China: The Holy Grail for investors.
Home to roughly 20 percent of the globe’s population and with a still-thriving economy that is shielded from outside investment, China represents the Holy Grail to Wall Street firms. Any company that can earn widespread exposure to the Chinese market stands to make a killing. China’s president, Xi Jinping, is giving new hope to investors with his promise to ease restrictions on foreign investment. Here are 13 companies that are hoping to capitalize on Beijing’s willingness to open its markets and represent the best ways to bet on China.
1. Alibaba Group Holding (ticker: BABA)
Market capitalization:
$148 billion
Year-to-date performance:
-43 percent
Alibaba has had a tough year. Just a few months after going public, BABA stock was rocked in January when Yahoo! Inc. (YHOO), said it would spin off its $40 billion stake in the e-commerce giant. Then the Chinese economy slipped, and Beijing accused Alibaba of failing to stop the sale of fake goods. An infusion of foreign investment could help turn BABA stock around, though, so Alibaba has much to gain from Xi’s talks with the Obama administration.
2. Amazon.com (AMZN)
Market capitalization:
$247 billion
YTD performance:
70 percent
Amazon chief Jeff Bezos was one of more than a dozen executives who sat with Xi this week at a forum hosted by the Paulson Foundation, and with good reason. Amazon has been doing business in China for more than a decade, and this year launched a cross-border service to help China-based sellers export globally. Amazon has been aggressive in tapping the Chinese market, even opening a store on the online shopping site Tmall that is owned by competitor Alibaba.
3. Apple Inc. (AAPL)
Market capitalization:
$644 billion
YTD performance:
2 percent
Few companies have been hurt worse than Apple by this year’s collapse of the Chinese economy. China is Apple’s second-largest market (after the Americas), accounting for more than a quarter of its revenue and 50 percent of Apple’s revenue growth. To make matters worse, Apple pays its Chinese suppliers and assembly plants in dollars, but sells its products in China in yuan, so it is doubly hurt by the falling value of China’s currency.
4. Baidu Inc. (BIDU)
Market capitalization:
$47 billion
YTD performance:
-41 percent
Baidu, the Chinese web services giant, is essentially the Google of China, serving nearly 630 million mobile search users and more than 300 million mapping active users in the last quarter. Like other Chinese e-commerce stocks, BIDU took a hard hit this year. But Baidu is aggressive in growing its business through online-to-offline investments, and interestingly, is one of the most aggressive investors in Uber, the U.S.-based on-demand taxi service that appears destined for an initial public offering in 2016.
5. Berkshire Hathaway Inc. (BRK.A, BRK.B)
Market capitalization:
$316 billion
YTD performance:
-14 percent
It’s no surprise that Berkshire Hathaway’s chief, Warren Buffett, was one of the CEOs meeting with Xi this week. The Oracle of Omaha has long been bullish on China, calling the country’s growth “totally miraculous” earlier this year. And Chinese investors closely watch Buffett and his holdings — at least seven Chinese media outlets covered Berkshire Hathaway’s annual meeting in recent years. Buffett’s stamp of approval on Xi’s plans should reverberate throughout the Chinese economy.
6. Boeing Co. (BA)
Market capitalization:
$86 billion
YTD performance:
-2 percent
In a joint appearance this week, Boeing executives and Xi announced a deal that will have China buying 300 more Boeing aircraft this year, and that Boeing would also work with Commercial Aircraft Corporation of China to build a facility for painting and completing the exteriors of aircraft. Boeing’s relationship with China extends more than 40 years, and Xi is on record that he wants to expand relations with the jet maker.
7. Cisco Systems, Inc. (CSCO)
Market capitalization:
$126 billion
YTD performance:
-10 percent
Cisco, which sells Internet networking products and helped build China’s internet, went into a deep slide in August after the stock was downgraded by Morgan Stanley. But Cisco announced a $100 million deal this week with Inspur group, a Chinese information technology company, to resell Cisco gear and develop hardware. That follows an announced $10 billion investment earlier this year to promote high-tech industry in China.
8. Facebook Inc. (FB)
Market capitalization:
$260 billion
YTD performance:
18 percent
It’s amazing that Facebook has lured more than 1.2 billion monthly active users without tapping into the Chinese market. Facebook and other social media networks are banned in China as Beijing keeps close tabs on content contrary to its interest. But Mark Zuckerberg is undeterred, making it a point to meet with Xi this week, and conducting his meeting entirely in Mandarin. If Facebook can squeeze its way into China, 2 billion users are not out of the question.
9. Ford Motor Co. (F)
Market capitalization:
$53 billion
YTD performance:
-13 percent
Xi made it a point this week to single out Ford and General Motors, saying both companies can expect to boost their investment in China. That has to be music to the ears of Ford CEO Mark Fields, who has said the company remains bullish on China and forecasts the need for about 30 million vehicles in the next decade. Ford thinks it can make headway in smaller Chinese cities, which do not limit the number of cars an owner can have.
10. General Motors Co. (GM)
Market capitalization:
$45 billion
YTD performance:
-17 percent
General Motors is the second-largest vehicle dealer in China, behind Volkswagen (VLKAY), selling more than 2.1 million vehicles there through August. And it sees opportunities for its popular SUVs, particularly the Buick Envision, which had its best sales in China this year and sells for a premium that makes it much more profitable than a similar sale in the U.S.
11. Google Inc. (GOOG, GOOGL)
Market capitalization:
$437 billion
YTD performance:
21 percent
The Wall Street Journal reported recently that Google executives are in talks with the Chinese government about launching a new Android app store in the country. If so, it would mark Google’s return to a market that it mostly quit in 2010 following cyberattacks against Gmail users, and following complaints that the government was censoring Google content. While Google did not attend this week’s tech summit with China’s president, Google is already the No. 3 search engine in China.
12. Microsoft Corp. (MSFT)
Market capitalization:
$348 billion
YTD performance:
-6 percent
Microsoft is hoping a partnership with Baidu will increase its bottom line in China. The companies recently announced a partnership that would make it easier for Baidu customers to upgrade to the Windows 10 operating system, while Baidu.com becomes the default homepage and search engine for MSFT’s Edge browser in China. Microsoft says that Windows 10 users in China already number 10 million users, which would be about 22 percent of global users who have upgraded.
13. Netflix Inc. (NFLX)
Market capitalization:
$42 billion
YTD performance:
103 percent
Arguably the leading streaming video service, Netflix is expanding around the world and its executives badly want to enter the Chinese market. But that may not be so easy, as Beijing earlier this year announced a deal with Alibaba to expand video streaming services. Netflix says its plans to begin service in China next year are uncertain, but Xi’s promise to increase foreign investment could provide NFLX stock an opening.
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13 Stocks to Buy to Bet on China originally appeared on usnews.com
