Why These Two China-Based Internet Stocks Are Worth a Closer Look

Submitted by William Briat as part of our contributors program.

Why These Two China-Based Internet Stocks Are Worth a Closer Look

We all know how hot the social media space is with some sizzling returns shown by such stock market heavyweights as Facebook, Inc. (NASDAQ/FB), Twitter, Inc. (NYSE/TWTR), Yelp, Inc. (NYSE/YELP), and LinkedIn Corporation (NYSE/LNKD) to name a handful.

The valuation of these momentum stocks is especially high, but as long as there are buyers, these stocks will continue to attract major market surges.

Much of the easy money may be gone for now, but there are still some Internet stocks trading here that offer excellent potential for some staggering gains for aggressive traders.

Yet the stocks I’m referring to are based out of China, where the added risk is high due to the questionable reliability of the auditors and subsequent results.

If you are confident on the numbers of these Chinese stocks, it may be worth a speculative trade, but be warned that the risk is high, so don’t go and bet your 401(k) on these speculative Chinese stocks. Use only risk capital and make sure you are diversified; this will take some of the edge off the trade in case the stock goes against you.

If you like Amazon.com, Inc. (NASDAQ/AMZN) but aren’t willing to chase the high stock price and valuation, you may want to take a look at China-based E-Commerce China Dangdang Inc. (NYSE/DANG), which has been referred to as the Amazon of China. The online seller of books, home products, footwear, electronic and personal products, and related accessories has about 8.9 million active users as of its fourth quarter (ended December 31, 2013). The company also said it added about 3.1 million new users in that quarter alone.

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The numbers for Dangdang are impressive. The company beat on its fourth-quarter revenues and earnings and raised its revenue outlook for the first-quarter earnings season to above the consensus estimate. Revenues grew at 22.1% to $325.7 million in the fourth quarter. In 2013, revenues expanded at 21.8% to $1.04 billion. What’s interesting about the company is that not only are the results and metrics pretty good, but the company has refocused its efforts to turn the online web site into a shopping mall that will cater to moderate to higher-end consumers in China.

My second China-based, U.S.-listed stock pick to take a look at is online dating service Jiayuan.com International Ltd. (NASDAQ/DATE), which I feel will benefit from China’s massive population. The company beat on its fourth-quarter revenues and earnings and increased its revenue outlook for the first quarter. Revenues in the fourth quarter increased 20.4% year-over-year to $22.0 million.

While the revenues are relatively small, I believe there’s above-average potential here for the aggressive trader or investor. The company’s web site had about 4.92 million average monthly active users in the fourth quarter. Of this amount, about 1.38 million paid for some service, driving up the paying user ratio to 28.1% from 24.1% a year earlier.

So if you are looking for some aggressive Internet plays, take a look at companies like these two China-based stocks.

This article Why These Two China-Based Internet Stocks Are Worth a Closer Look was originally published at Daily Gains letter