Chinese stocks just finished their best quarter in more than four years.
The Shanghai Composite Index – a broad basket of locally traded Chinese A-shares – soared 24% in the first three months of the year.
Not only did that make China one of the best-performing markets to begin 2019, it also marked the best quarterly return for the index since the end of 2014.
Of course, most investors are scared to buy after a big move higher. They assume they've missed it... that the biggest profits are behind them.
That thinking is totally wrong, though. A strong uptrend usually signals more gains ahead... And history tells us that's the case in China, too.
The reality is that you haven't missed it at all. This big quarterly move could lead to another 29% upside in China over the next year.
Let me explain...
It's tough to do. But you really want to follow the trend when investing... You really want to buy things after they've gone up.
It's counterintuitive, but a mountain of data proves that this method works. Assets that start going up tend to keep going up.
It's no surprise that the Chinese market follows this as well. You really want to own Chinese stocks when they're trending higher. And one simple way to see a strong trend is to look at quarterly returns.
After a terrible 2018, the uptrend is back in China. The Shanghai Composite Index jumped 24% in the first quarter of 2019. Take a look...
It's easy to look at this and assume the easy gains have already been made. But that's not the case at all. History tells us that Chinese stocks tend to keep moving higher after a big quarterly surge.
Since 2000, we've only seen seven 20%-plus quarterly moves. That means it happens less than 10% of the time. But buying after these jumps has been a winning strategy. Take a look...
Local Chinese stocks have a history of incredible booms. But the busts always follow. That has led to terrible long-term returns... just 3% per year.
You can do dramatically better by owning this market when the trend is up, though. Buying after a strong quarter has led to fantastic upside... 9% gains over three months, 19% gains over six months, and 29% upside over a year, on average.
Importantly, we have a simple way to profit from this idea. It's the KraneShares Bosera MSCI China A Fund (KBA).
The fund holds a basket of locally traded Chinese A-shares. These are the kinds of Chinese companies that have been soaring – and should keep soaring, based on history.
That's the setup we have right now. Chinese stocks soared in the first quarter of 2019. But you haven't missed it... We have plenty of upside remaining.
History says we could see another 29% of upside from here. That means it's smart to be long Chinese stocks now.
Good investing,
Brett Eversole
Further Reading
"If you've stayed on the sidelines, you might think it's too late now," Steve says. "It might be hard to believe... But no, you didn't miss it." Learn why you haven't missed out on China – and why history points to more upside ahead – right here.
"I believe Chinese stocks are one of the best global opportunities right now," Steve writes. Read more about a sentiment shift that could be a once-in-a-lifetime tailwind for China here: A Cryptic Headline Says $2 Trillion Could Flow Into Chinese Stocks.
Right now, Chinese stocks are bouncing back from a brutal end to 2018. And as China's market continues to go from "bad to less bad," triple-digit gains are possible in this fund...
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Microsoft (MSFT)... tech giant
Broadcom (AVGO)... semiconductors
Oracle (ORCL)... software
Arista Networks (ANET)... computer systems
Cisco (CSCO)... Internet "plumbing"
Ubiquiti Networks (UBNT)... wireless networks
Motorola Solutions (MSI)... telecom
Global Payments (GPN)... electronic payments
Paychex (PAYX)... payroll services and software
Automatic Data Processing (ADP)... payroll processor
Shopify (SHOP)... e-commerce
Deckers Outdoor (DECK)... footwear
Nike (NKE)... athletic apparel
Estée Lauder (EL)... cosmetics
Procter & Gamble (PG)... everyday goods
Dollar General (DG)... discount retailer
Hershey (HSY)... snacks and chocolate
McDonald's (MCD)... "addictive" burgers
Tyson Foods (TSN)... Big Food
Kansas City Southern (KSU)... railroads
Norfolk Southern (NSC)... railroads
NEW LOWS OF NOTE LAST WEEK
UnitedHealth (UNH)... health insurance
Cigna (CI)... health insurance
Humana (HUM)... health insurance
Cantel Medical (CMD)... medical equipment
