12 Cheap Chinese Stocks to Buy According to Hedge Funds

1. Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 91

Forward P/E Ratio: 10.88

Alibaba Group Holding Limited (NYSE:BABA) is China’s largest e-commerce and cloud services company. The company also operates brick-and-mortar stores, logistics services, and digital media services.

Alibaba improved its revenue growth from 2% in fiscal 2023 to 8% in fiscal 2024 and the same is expected for fiscal 2025. One major development with BABA has been that it has started paying dividends and has a dividend payout ratio of 11.70%. This shows that the Chinese giant is flexible in giving away some of its earnings to investors.

On October 10, Alibaba Group Holding’s Tmall shopping platform’s new brand increased by 239% from August to September, as reported by the South China Morning Post. In the third quarter, Tmall’s new brand openings increased by 70% from the previous quarter. On November 12, Taobao and Tmall Group saw a record number of active buyers, while the company’s peer JD.com reported over 20% increase in the number of shoppers from a year ago. This shows that the consumer market is improving considering the economic slowdown.

Investors are not much pleased with the government stimulus and the Chinese companies have plunged following an initial pump after the stimulus news. Alibaba has a net revenue CAGR growth of 32.38% from 2013 and 2023, which shows that BABA is well-positioned in the market. BABA is trading 10.88 times its forward earnings, which represents a 40% discount to the sector median of almost 18.

While we acknowledge the potential of Alibaba Group Holding Limited (NYSE:BABA) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

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