It's no surprise that the trade war between the United States and China has battered down several top Chinese stocks.
Most recently, the White House threatened its rival's economy with tariffs on an additional $300 billion in goods should Chinese President Xi Jinping not attend the G-20 conference later this month and discuss trade policy with Trump.
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However, China just announced plans to increase infrastructure stimulus to spur development in the world's second-largest economy. The ongoing rounds of mixed news have spurred big buys and sell-offs over the last 30 trading sessions.
That makes it difficult to know which way stock prices are heading in the future...
Sometimes an overreaction to bad news can push even the best stocks to buy into negative territory.
That's why we turn to the Money Morning Stock VQScore™ system to identify stocks that have been beaten down and are now about to break out and bounce back in a big way.
Today, we found the top Chinese stock to own for the long run.
Investors Are Overlooking This Chinese Stock
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The best Chinese stock to own right now is the e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA). As one of the nation's largest and public-facing companies, recent trade developments naturally fueled a sell-off in the company stock.
However, it's worth noting that despite a nearly 20% decline in May, shares are still up roughly 10% since the start of the year. And there is plenty of evidence to support the thesis that this recent downturn is just a temporary blip in the stock's long-term potential.
Let's look at why this sell-off is overdone...
Right now, investors are paralyzed when it comes to considering Chinese stocks.
The short-term outlook for Alibaba and China is naturally rocky due to the overwhelmingly negative sentiment in the markets over the trade war.
However, the markets still largely anticipate that the United States and China will reach a deal. At the same time, China will continue to provide stimuli like its new infrastructure plan to help bolster the economy and commerce.
It's important to remember that the $300 billion in proposed tariffs don't heavily impact Alibaba by the United States. That's because Alibaba generates about 90% of its revenue from Chinese firms selling products directly to Chinese consumers.
Although economic weakness in China could impact the firm's profitability, Alibaba just reported Q4 revenue growth of 51% year over year.
The most important reason why we feel Alibaba is poised to break out is because of its high VQScore.
See, we track the 1,500 most profitable companies on the market and assign each one a score - the higher, the better.
To earn a VQScore, we use key factors like EPS growth and demand for the company stock to find businesses ready to outperform "average" returns.
A score over 4 puts the stock in the "Strong Buy Zone" and signals it's ready to take off.
With a VQScore of 4.15, Alibaba stock is poised to break out in the second half of 2019.
By the summer of next year, it wouldn't surprise us to see the stock rocket 42% higher.
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