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CNN Money's Daniel Shane just put out a doozy.
Just take a look at this Oct. 5 headline: "China's Tech Stocks Are Partying Like It's 1999."
"Shares in China's biggest internet companies are on a tear this year," Shane went on to write, "but some investors think things have gone too far."
The guy didn't even have the guts to make this argument himself. Instead, he leaned on "some investors."
To me, this is just the latest rehash of the half-decade-old effort – among "some investors" – to prove that a Silicon Valley "tech bubble" was about to burst.
This time, there's a slight twist. The bears' latest "bubble" is across the Pacific Ocean, among Chinese web firms.
The idea at work here is that China's entire e-commerce sector is about to go the way of the "dot-com" crash that slaughtered the Nasdaq Composite more than 17 years ago.
Here's the thing. Shane's entire premise is based on a false analysis. I think "some investors" may have led him astray.
Today, I'll show you, with math, that the opposite is true.
I'll prove that China's web leaders are not in a bubble – and that they offer tech investors like you huge long-term upside.
Plus, we'll investigate a great way to ride this trend for maximum profits – the kind of profits that keep beating the market year after year after year…
Do the Math
The best class I ever took in college was advanced statistics. I have burnished that education over the years by regularly working on my skills in ratio analysis.
What that means is you compare one set of numbers against another, often a benchmark like the return of an overall index against that of a specific stock.
Let me explain why this is important. See, the CNN Money piece made the bold claim that China's web firms are overpriced based on a simple metric. Shane noted that some of the firms trade at high multiples of forward price to earnings (forward P/E).
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Be he failed to turn up even a single piece of empirical data.
Folks, this is something that's in my DNA. I do these kinds of comparative analyses all day long as I hunt for profitable tech plays.
I do all this math because I'm a growth investor. And so even if I've found what I believe is a breakout stock with huge earnings upside, I still want to know how much of a premium I'm paying.
So let's drill down and get specific. The Nasdaq 100 index trades at 21.3 times next year's earnings. This gives us a good benchmark to compare how much of a premium we are paying for the enormous growth that defines China's web sector.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.