Chasing Value: A Chinese Trade Deficit?

At one time I held several Chinese stocks. The list is down to two and I even sold a portion of those shares taking some gains. Given that the rule of law and enforcement of trademarks and patents still have a long way to go, not to mention accounting practices, I think one has to buy Chinese stocks at a greater discount than U.S. companies.

The two stocks I own currently are PetroChina Co Ltd. ADR (PTR) and the Aluminum Corporation of China ADS (ACH), sometimes referred to as Chalco.

PetroChina's 52 week range is $99.02 to $144.07. It closed yesterday at $138.68 hovering near the high. Chalco's 52 week range runs from $18.03 to $28.08. Last night it closed at $23.05, exactly the midpoint.

Today I will review PetroChina comparing the fundamentals to American companies to see where there might be some value? I selected Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) for this purpose. The following data considers some popular metrics.

Price-to-earnings

• Chevron: 9.63
• ExxonMobil: 11.76
• PetroChina: 13.45

Price-to-sales

• Chevron Corp: 0.97
• ExxonMobile: 1.05
• PetroChina: 1.20

Price-to-book

• Chevron: 1.60
• PetroChina: 1.85
• ExxonMobil: 2.15

Price-to-cash-flow

• Chevron: 6.37
• PetroChina: 8.7
• ExxonMobil: 9.0

Return-on-invested-capital

• ExxonMobil: 20.93%
• Chevron: 17.30%
• PetroChina: 8.4%

Dividend Yield

• PetroChina: 3.0%
• Chevron: 2.89%
• ExxonMobil: 2.14%

If you believe the numbers, then clearly Chevron is the best value at this time. I came to the same conclusion last December when I encouraged readers to consider investing in defense and oil stocks (Chasing Value: Defense and Oil -- Part 4 Conclusion). Given what is going on in the world today, that advisement was spot on.

As far as PetroChina is concerned it looks to be an average investment for near term. There is not enough of a discount to its foreign competitors at this time.

Sheldon Liber is an architect and the CEO of Chasing Value™ Asset Management, Inc. He writes the columns Chasing Value™ and Serious Money and is on twitter: @ChasingValue. Disclosure: Mr. Liber currently owns shares and/or options in ACH, CVX and PTR.