If you've made it this far, you've passed the test. Chinese stocks aren't very popular with stateside investors these days. With tariffs about to muddy up a trade war and TikTok's ban hanging in the balance, it's easy to sidestep exposure to China when there's a world of other opportunities available.
I think that is a mistake. I imagine you feel the same if you found your way here. China remains one of the world's largest economies. Risks are heightened in these fearful times, but that has also lowered the valuations of quality investments with years, if not decades, of stellar financial performance.
I own a few Chinese stocks heading into this new year. Three that I want to talk about right now are Baidu (BIDU -4.81%), Alibaba Group (BABA -3.78%), and Qifu Technology (QFIN -3.79%).
1. Baidu
Search isn't Baidu's only engine. Baidu has been the country's top search engine for decades, but it's also now a major player in autonomous driving, robotics, machine learning, computer vision, and all things AI.
Being on the cutting edge in China hasn't been a hotbed of growth. Baidu has posted one year of double-digit revenue gains since 2018, and investors have noticed. Shares of Baidu plummeted 29% last year, the one name on this list of Chinese stocks that went the wrong way in 2024.
Image source: Getty Images.
Things should get better from here. Baidu is making strides on the other end of the income statement. It had a streak of at least six quarters of double-digit percentage beats on the bottom line before falling short in its latest report. With the shares drifting even lower early in 2025, the stock is trading for less than eight times trailing adjusted earnings.
Baidu is good for the money. Its cash-rich balance sheet shrinks a $28.5 billion market cap to an enterprise value of just $23.4 billion. With $18.3 billion in trailing revenue, it trades at an attractive enterprise value that is just 1.3 times its top line. Armed with a double-digit net margin, Baidu is an unheralded financial performer trading at a compelling price point.
2. Alibaba
Alibaba is an e-commerce giant in the world's second most populous nation. Like Baidu, it has seen its growth slow in recent years. It has posted one quarter of double-digit top-line growth over the past dozen reports. Alibaba is facing competitive pressures from deep discounters including Shein and Temu parent company PDD Holdings.
Alibaba remains an e-commerce powerhouse. It turned Singles Day, Nov. 11, into a Chinese shopping holiday in 2009. Revenue has exploded more than 250-fold in that time. Lately it's been unloading some noncore assets, but this isn't a retreat. Alibaba is making sure that a more focused approach delivers for its shareholders. Analysts see revenue and earnings growth accelerating in its new fiscal year that starts in April.
Alibaba is now trading for just nine times forward adjusted earnings. It also returns money to its investors through semiannual distributions. It currently yields 2.5%. With Alibaba ready to win back market share in China's growing economy, it pays to be patient and opportunistic.
3. Qifu Technologies
The smallest of the three companies here is Qifu, but with a market cap of $5.6 billion and trailing revenue of $2.3 billion it's not exactly tiny. Qifu operates a platform that provides credit solutions to its 55.2 million cumulative users that it matches across 162 partners in the financial services industry through proprietary AI-fueled credit assessment tools.
Qifu serves consumers as well as small and medium businesses, but it focuses on a market ignored by larger players that favor seasoned credit histories of folks living in China's Tier 1 cities. A hearty 70% of its borrowers are younger than 40, and 81% of them are the country's rural territories.
Consistently profitable, Qifu is betting on itself. It announced a share buyback plan in March of last year and rolled out a second one in November after completing its first round. That was a smart move, as Qifu stock more than doubled last year. The company is also returning money to stakeholders with semiannual payouts, currently yielding 3.3%. If the forward earnings multiples of Baidu and Alibaba seem low, you can pick up Qifu for only six times its forward profit target.
