These Stocks Have Triple-Digit Upside Potential

In less than two years, the biggest Chinese companies soared 250%.

And right now, I believe these stocks are set for another triple-digit winner.

We all know the negative stories. China is slowing. We’ve seen on TV that China has built “cities” of apartments and shopping centers – with no people in them! And Chinese companies are heavily leveraged.

[ad#Google Adsense 336×280-IA]But the most hated trades typically have the most upside potential.

I hope you can get over the “ugly” story and make this trade…

The reward-versus-risk is incredible here.

Let me explain…

The main way for Americans to own Chinese stocks is to buy shares of the iShares China Large Cap Fund (FXI), which trades on the New York Stock Exchange.

In 2006, FXI was trading around $20 a share. By 2007, it had hit a high around $70 a share. Take a look:

The thing is, Chinese stocks can move down as fast as they can move up… From late 2007 to late 2008, this fund lost two-thirds of its value!

My point is, Chinese stocks can be volatile – you can make a lot of money or potentially lose a lot of money.

Fortunately, you can control your downside risk… Today, you can trade China with roughly 16% downside risk… and still have triple-digit upside potential. So why do I think it’s possible to make triple-digit returns in Chinese stocks?

To me, it’s simple… Chinese stocks have the three things I look for in an investment… They are 1) cheap, 2) hated, and 3) just starting an uptrend.

The top holdings in FXI are trading at an average 8.7 times earnings with a dividend yield of 4.3%. Take a look:

Judging by the headlines, China is hated. If you went to a cocktail party and told folks you were buying Chinese stocks, they’d look at you like you were crazy.

And the uptrend is clear today… FXI is up from a low around $32 in July to $38 as I write.

Here’s one way you could trade it…

Buy FXI, and set a stop loss at $32. This gives you $6 of downside risk (about 16%). But leave your upside unlimited, looking for a triple-digit return.

Is this a speculation? Yes, absolutely… This is not a lifetime investment. Stay in the trade for two years or less.

It’s hard to set up trades with risk-to-reward characteristics as good as we have here. This is an incredible opportunity for a trade on Chinese stocks… They’re currently in the sweet spot of cheap, hated, and in an uptrend.

That’s exactly what we look for in a trade.

Good investing,

Steve

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Source: DailyWealth