The small-cap market is one fraught with possibility. Businesses worth between $300 million and $2 billion (the standard definition of small-cap) have both a more established track record than, say, a micro-cap, as well as room to grow at a much faster rate than a mid or large-sized company. They can skyrocket, as we saw China New Borun (BORN) do in mid-October when it gained over 107 percent in three days.
Of course, an alternate fate for a small-cap besides exponential growth is utter failure, as small-caps bust out at a much higher frequency than their larger counterparts. But the excitement behind small-cap investment keeps investors coming back, as the promise of a multi-fold return is too hard to ignore.
Similar to the small-cap market, the Chinese investment landscape is laden with booms and busts. Like any developing economy, it’s an undeniably risky environment for developed market investors. But the rewards, of course, can be substantial.
So when you take the risks of small-cap investing and compound it with emerging market investing, you get a double whammy of risk. But again, for an adventurous investor, that extra risk just means the opportunity for extra reward.
To temper this risk somewhat, we went looking for the Chinese small-caps that have an analyst consensus of “strong buy.” That means that the overall opinion of the company is the highest possible.
On the American market we found four Chinese small-caps that had scored the highest possible consensus marks from experts:
Bitauto Holdings Limited (BITA)
Bitauto is an internet and marketing company that works in conjunction with the burgeoning Chinese automotive industry (in case the name confuses you, it’s “bit-auto.”) In the second quarter the company reported non-GAAP earnings of $9.6 million, representing an increase of 105.8 percent from the year prior.
Bitauto currently trades at $25.46 a share. It’s up 248.77 percent on the year.
China Distance Education Holdings Limited (DL)
This “storefront academy” offers extracurricular test prep services and tutoring for students. The company also provides foreign language classes, certification in a variety of white-collar professional fields, and sells textbooks and reference materials.
China Distance Education trades at $12.00 a share, up 203.80 percent on the year.
Netquin Mobile Inc. (NQ)
Known colloquially as “NQ,” this company makes security apps for mobile phones, specifically malware, antivirus, and spam protection software. American audiences should take note that this company also makes the wildly popular Chinese iOS game “Gods and Dragons,” which rolled out in the States in September.
NQ currently trades at $24.44 a share, and is up 304.64 percent on the year.
21Vianet Group Inc. (VNET)
Another tech play, 21Vianet bills themselves as being the “largest carrier-neutral internet data service provider in China.” 21Vianetrecently hit a 52-week high after receiving a $100 million investment from Singaporean investment group Temasek.
21Vianet currently trades at $19.41 a share, ands is up 101.98 percent on the year.
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