Stocks with shaky fundamentals and high multiples get hit the hardest in a market downturn and should be avoided when markets look stressed. Examples include solar stocks such as Suntech Power , Trina Solar , Yingli Green Energy, LDK Solar , Canadian Solar and Solarfun. But a market selloff can be a good opportunity to pick up cheap shares of oversold stocks with rock-solid fundamentals. The best example is Duoyuan Printing.
As the markets were melting down last week, I ran a few stock screens to see which China stocks were getting hit the hardest and also to see if I could find anything with strong fundamentals that looked oversold.
By far, the worst performing China names from last week were the solar stocks, all of which were down by more than 20% for the week. The solar stocks all share some commonalities: They have a short or mixed profitability record and they have been trading on very high multiples....
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