Cramer OKs 3 growth plays in China

Typically, Jim Cramer wouldn't suggest the stocks of China based companies for investment on a good day, let alone a day when the tumbled by triple digits.

However, ahead of the Alibaba IPO, Cramer thinks there may be significant opportunity in the space, as pros become more interested in the growth offered by some of these companies.

In part the sentiment shift is due to intriguing new research, such as the following from Renaissance Capital which shows, "For 2014, Chinese tech deals have returned 68 percent year-to-date, while non-Chinese tech deals are up 20 percent," Cramer said.

As enticing as those gains may be, Cramer also says pros will be very discriminating with their money and only buy stocks that are considered the best of the best.

What should you buy, if you want to ride this wave? Following are the three China-based stocks Cramer thinks warrant your attention. And, as always, Cramer says all China stocks are for speculation, only.

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Vipshop

Cramer introduced Vipshop in May, and even though shares have rallied almost 30 percent since that time, he thinks there's still more upside ahead.

This company is "the largest online discount retailer in all of China," Cramer said. "What they do is sell branded merchandise at deep discounts, sometimes as much as 80 percent off. I like to think of Vipshop as the Chinese version of TJ Maxx, except it's all done over the Web."

Business is booming, in part, because China's retail infrastructure is not well developed. The strength is reflected in the numbers. "When Vipshop last reported in May, they had 7.4 million customers, up 160 percent year-over-year. The company's revenues soared 126 percent, and their earnings more than quadrupled," Cramer said.

Projections are even more bullish; Vipshop expects revenue growth to be in excess of 100 percent.

All told, Cramer is a buyer, especially if the market drags down shares. "I think it's pretty darned inexpensive, trading at 42 times earnings. That may sound like a high multiple, but it's nothing next to Vipshop's incredible growth rate."

JD.com

Cramer called JD.com the Amazon of China. "Effectively JD.com sells merchandise directly to consumers. And just like Amazon, JD is able to sell at a discount versus bricks and mortar retailers."

Cramer considers this stock a pure play on growth, as it expands into new product categories and rolls out new businesses, again like Amazon.

"However, the similarities with Amazon don't end there, JD.com is also not yet profitable," Cramer added, and the market has been known to punish stocks that trade on sales rather than earnings.

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Nonetheless, "the growth here is pretty darned fast and while the stock has rallied from $19, where it came public in May, to $28 and change as of today's session, I think it could have more upside going forward."

Baidu

Perhaps the most well known of the three stocks here, Cramer described Baidu as the Google of China.

"This is a real company with very real earnings. I've liked it for ages, and for years this was the only Chinese stock I'd recommend as an actual investment, not a trade. Baidu's given you a 1,400 percent gain since the generational bottom in 2009, and it's up a quick 28 percent since I last recommended it roughly five months ago."

Cramer's reason for owning Baidu is fairly straight forward. As more Chinese consumers join the ranks of the middle class, and obtain access to the Internet on both desktop and mobile, Cramer thinks Baidu stands to win big.

"Given the 36 percent long term growth rate, at 26 times next year's earnings estimates, and I think Baidu is absurdly cheap," he said.

Call Cramer: 1-800-743-CNBC

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