China-based stocks lost some shine when the Senate passed the Chinese oversight bill. But investors should look at Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) as the two best firms to watch in the region.
The Senate passed legislation that requires U.S.-listed companies to certify that they are "not owned or controlled by foreign government." This does not make sense because the U.S. has the Securities and Exchange Commission to investigate potentially fraudulent firms. Luckin Coffee (NASDAQ:LK) is a bad seed that some how tricked investors.
Alibaba’s Q4/2020 earnings of $1.30 (non-GAAP) and revenue growing 22% Y/Y to $16.14 billion is impressive. The e-commerce giant is a dominant player in the mobile space. It deserves a market capitalization bigger than that of Amazon.com (NASDAQ:AMZN).
The company has a $1.4-billion smart speaker investment that should bear fruit.
JD.com is another well-run Chinese firm. It earned 28 cents a share (non-GAAP). Its revenue grew a solid 20.7% Y/Y to $20.6 billion. Despite COVID-19 in China, JD keeps adding more active customers. Its margins are increasing while its logistics back-end gives the company a strong moat.
Both JD and BABA stock could dip further but the correction may not last long. The strong growth justifies a higher long-term valuation.
