With tech firms facing China hurdles, play these names: Pro

HP sells Chinese stake
HP sells Chinese stake   

Big U.S. tech firms have been encountering growing hurdles in China, but portfolio manager Jim Oberweis said Thursday that doesn't mean investors should necessarily ignore names doing business there. They just have to know where to look.

The Chinese government is "certainly making it more difficult" for U.S. tech companies operating in the country, the president of Oberweis Asset Management said in an interview with "Power Lunch."

He believes it is a combination of the Chinese government's concerns about cybersecurity and its desire to level the playing field for some of the upstart Chinese companies.

On Thursday, Hewlett-Packard announced it was selling a 51 percent stake in its china server, storage and technology storage unit for about $2.3 billion to Tsinghau Holdings, part of state-owned Tsinghau University. The move was a part of HP's plan to restructure after the Chinese government began encouraging the use of products from local tech companies.

In February, China dropped Cisco, Apple, Intel's security software firm McAfee, and network and server software firm Citrix from its approved state purchase lists. At the same time, it approved thousands of more locally made products.

Oberweis is no stranger to investing in China. The Oberweis China Opportunities Fund received a Lipper Award for best fund in the China Region classification for the three-year period ended Dec. 31, 2014.

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He believes there are certain ingredients to look for when deciding to invest in a company that does business in China.

For one, it should have a diversified mix of non-government customers, which is harder to regulate, he said.

Investors should also pay attention to policy trends.

"In other words, are you in an industry like Cisco, where it's really sensitive and you know the government is likely to go after the poster child?" he said.

Oberweis prefers small-cap companies, which he said are not such a big deal for the Chinese government "and make lousy poster children."

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However, if the market is already expecting the government to attack a certain area, investing it in may not be such a big deal since those expectations are likely baked in, he noted.

Specifically, he likes the entertainment technology company Imax and Synaptics, which makes interfaces for computers and cell phones.

Audience members watch a movie through 3D glasse at an IMAX theatre in Wuhan of Hubei Province, China.
Getty Images
Audience members watch a movie through 3D glasse at an IMAX theatre in Wuhan of Hubei Province, China.

Imax is "exploding" in China, with 220 theaters currently in the country and another 220 being build, Oberweis said.

That said, it is still only about 1.5 percent of the box office in China, he noted.

"It's an insignificant share of the market but they're certainly benefiting from the overall growth and the end customers are diversified and they're not government owned."

He likes Synaptics because it sells to Chinese upstarts, as well as major players like Samsung and Apple.

—CNBC's Jennet Chin, The Associated Press and Reuters contributed to this report.

Disclosure: Jim Oberweis' positions in Imax and Synaptics were unavailable.

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