Joel Greenblatt the famous investor outlined in his book "The little book that beats the market" a simple yet powerful concept: Buying cheap stocks with high returns on equity. According to Greenblatt, if you followed this strategy and rebalanced the portfolio every year, your returns would be more than double the market averages. I have screened for Hong Kong stocks with a market cap of at least 1 billion USD, P/E < 11 and ROE > 20%. Here is the full list:

10. Huabao International Holdings Ltd

Market cap: 1.2 billion USD
Industry: Chemical Manufacturing
P/E: 8.16
ROE: 24.77%
Dividend: 3.69%

9. Guangzhou R&F Properties Co Ltd

Market cap: 2.5 billion USD
Industry: Construction Services
P/E: 3.5
ROE: 25.6%
Dividend: 7.3%

8. Luk Fook Holdings International Ltd

Market cap: 1.06 billion USD
Industry: Retail (Specialty)
P/E: 7.5
ROE: 26.5%
Dividend: 5.3%

7. Hang Seng Bank Ltd

Market cap: 18.5 billion USD
Industry: S&Ls/Savings Banks
P/E: 9.2
ROE: 26%
Dividend: 4.2%

6. Truly International Holdings Ltd

Market cap: 1 billion USD
Industry:  Electronic Instr. & Controls
P/E: 8.1
ROE: 27.4%
Dividend: 4%

5. Sunac China Holdings Ltd

Market cap: 1.2 billion USD
Industry: Construction Services
P/E: 4.25
ROE: 27.5%
Dividend: 6.7%

4. Xinyi Glass Holdings Ltd

Market cap: 1.4 billion USD
Industry: Constr. - Supplies & Fixtures 
P/E: 6
ROE: 29%
Dividend: 5.5%

3. COFCO Land Holdings Ltd

Market cap: 1.3 billion USD
Industry: Real Estate Operations
P/E: 4.9
ROE: 30%
Dividend: 0%

2. Great Wall Motor Co Ltd

Market cap: 7.7 billion USD
Industry: Auto & Truck Manufacturers
P/E: 8.7
ROE: 31%
Dividend: 5.7%

1. Hisense Kelon Electrical Holdings Co Ltd

Market cap: 1.07 billion USD
Industry: Appliance & Tool
P/E: 10.3
ROE: 61%
Dividend: 0%

Baidu is the leading Chinese language internet search provider, through it's website Baidu.com. It is the largest website in China and fifth largest globally. The company captures 81.6% of internet search traffic in China and was voted number one out of the BrandZ top 50 most valuable Chinese brands. BIDU is basically a Chinese version of Google and a very successful one. It was founded in 2000 by Robin Li, now the wealthiest businessman in China. He used to work for Dow Jones & Company, where he developed search engine ranking algorithms (he received a U.S. patent for them), which served as a basis for Baidu.

The company makes money by selling advertising space to businesses and websites. The process is the same as with google: an advertiser bids for a certain keyword or ad space, and when a user searches for it, it gets displayed either at the top of the results or on a website the user visits. In addition to search, Baidu offers a range of other online products including: social-networking, UGC-based knowledge products, location-based products and services, entertainment, security products, mobile related products and services and specialized products and services for developers and webmasters.

China has in internet population of 600 million, and mobile internet population of 500 million. But with less then half the country connected, the penetration is far below developed countries. Baidu's video site Iqiyi already became number one, overtaking it's major rival Youku. The company also owns Qunar (QUNR) a major travel website and Nuomi, an online marketplace for entertainment, dining and health products. They also bought one of China's largest mobile game and app distribution companies, 91 Wireless.

Let's take a look at BIDU's financials:

The company is one of the largest comprehensive marketing, promotion and channel management service providers dedicated to imported pharmaceutical products and medical devices in China. Founded in 1996, Pioneer has established a nationwide marketing, promotion and channel management service network covering over 20,000 hospitals and other medical institutions across 31 provinces, municipalities and autonomous regions in China. The business headquarters is located in Shanghai, while the logistics operations are in Hubei. They had an IPO in November 2013.

China Pioneer Pharma essentialy works as a sales network for foreign pharmaceutical companies. Big firms like Eli Lilly or Pfizer have their own networks, but smaller and mid sized businesses sometimes do not want to go through the hassle and risk of building a sales force in China from scratch. That's where the company's expertise and experience steps in. They basically promote foreign pharmaceuticals to physicians and hospitals, for what they collect a fee.

They held a 9.4% share in China according to their IPO prospectu:
We have a 17-year operating history, and, according to the Frost & Sullivan Report, we were the second largest marketing and promotion service provider for pharmaceutical products in China based on wholesale value of products sold, accounting for 9.4% of the market in 2012.

According to the same Frost & Sullivan Report, the market for imported pharmaceutical products grew from RMB26.8 billion in 2008 to RMB60.3 billion in 2012, representing a CAGR of 22.5% from 2008 to 2012, and is expected to continue to grow at a CAGR of 21.1% and reach RMB159.6 billion in 2017. That is the entire market, but the segment for distribution and marketing is expected to grow even faster:

1. Interactive Brokers

The undisputed leader in online trading, Interactive Brokers offers the best and cheapest solutions for investors and traders worldwide. Commissions get as low as $1 per trade, depending on the exchange and product you are trading. IB offers stocks, options, warrants, bonds, futures, forex, funds, etfs and many others, on exchanges in US , Europe (almost all countries), Asia (Japan, India, Hong Kong, Singapore, Korea) and South America. The catch is, that you need a minimum of 10 000 USD to open an account.

The company also offers master account solutions for hedge funds and advisors , through which they can manage their clients. I myself have an account with IB simply because they are the best and cheapest. I also manage some of my clients through here, as it offers a safe and convenient way for funds management.

2. Charles Schwab

Schwab is a relatively old company, which offers online trading for stocks, options, bonds and mutual funds. Their fees are sometimes higher, but you can open an account with as low as 1000 USD. The good thing is, that they also offer stock markets in Hong Kong, Japan, Canada, UK and the rest of Europe.

3. Saxo Bank

The Danish bank emerged as a leader for European retail investors, offering a lot of exchanges at affordable prices. You can trade all European and North American stocks, plus Singapore, Hong Kong, Australia, Tokyo. The company offers stocks, bonds, forex, futures, options, CFDs and funds. You also get lower commissions if you trade more frequently or deposit a large sum in the account.

4. Fidelity Investments

One of the largest investment companies in US, Fidelity has a wide range of products in nearly 25 countries and 16 currencies. You can trade stocks, funds, options and bonds in North America, Europe, Hong Kong, Japan, Singapore and South Africa. Fidelity is definitely one of the cheapest brokers out there, beaten only by Interactive Brokers.

Each broker has different commissions, and they might not accept customers from certian countries. So check individually before you open an account, to find the best one that suits you.

Dividend stocks in Hong Kong are usually property companies, which have valuable real estate and rent it for fixed income. Prices of these stocks have recently gone down, pushing the yields up and creating interesting opportunities. Here are the top 13 dividend stocks in Hong Kong:

13. China Aluminum International Engineering Corp (2068)

China Aluminum International Engineering Corporation Limited is a China-based technology, engineering service and equipment provider in the nonferrous metals industry.
Market cap: 7.5 billion HKD
Dividend yield: 5.13%
Payout: 20%
P/E: 3.2

12. Industrial and Commercial Bank of China (1398)

The company provides  banking and related financial services, including commercial banking, investments, insurance, fund management and various other services.

Market cap: 1.5 trilion HKD
Dividend yield: 5.96%
Payout: 34%
P/E: 5.2

Markets have been a bit choppy lately, and my stocks performed a bit poorly. Only the UK portfolio held up well, with a 21% gain since November vs. FTSE100 loss of 3%. My US portfolio is up 6.6% vs. S&P500 5.6% and the HK portfolio is down 1.87% vs. HSI -8.66%. I'm beating the markets by a slight margin but I'm not satisfied, the results could be much better, I held certain stocks for too long and didn't buy others, there is still a lot of space to improve my strategy. As a result, I'm selling PEGA, Biostime International (1112.HK) and NewOcean Energy (342.HK). They have been in downtrends for quite some time and I should have sold earlier but everyone is a general after the battle. I will dispose of these holdings today and look for other opportunities.

NewOcean Energy Holdings is engaged in sale and distribution of liquefied petroleum gas (LPG) and sale of electronic products. The Company operates in three segments: sales and distribution of LPG through Zhuhai terminal and in the international market; sales and distribution of LPG through retail networks in the People's Republic of China and Macau, and sale of electronic products. It's main industrial customers include car manufacturers, chemical plants, aluminium mills or glass factories.

The company has become the largest LPG operator in the South China Region, supplying 24% of LPG for the Guangdong province ( industrial center of China, it represents more than a quarter of the country's exports and houses 100 mil. people). The Company wholly owns a Class 1 LPG sea terminal in Zhuhai, China for VLGCs (Very Large Gas Carriers) through which it conducts the majority of it's business by importing and re-exporting LPG to businesses and households.   The sale to end- users in done through 220 retail outlets, 16 bottling plants, 17 autogas refueling stations. They effectively own the storage, transportation, refueling and bottling of LPG in Guangdong, creating a top-to-bottom distribution network, in other words a vertical monopoly. This is a result of several years of heavy capital expenditures, which will now start to bear fruit. Consequently, many customers require high quality LPG in vast amounts, which only Newocean can supply.

The group is slowly switching it's business to household consumers, which offer a significantly higher margin (13% for car LPG, 35% for bottled) than industrials (6%). As Guangdong is the province with largest LPG consumption, NewOcean estimates that demand for LPG will grow by 8-10% in the coming years, driven by conversions from oil to gas and LPG's use as a chemical feedstock. In addition, the company started a marine bunkering business in Hong Kong (transporting fuel oil to ships) in May 2012, and already generated 940 mil. HKD of revenues (14% of total) in the first 8 months. Teir profit on these operations will increase significantly, as they completed a 70 000 barrel storage facility in Zhuhai just now. Recently, they signed an agreement with China's Sinopec to develop additional autogas refueling stations in Guangdong as well as began selling bottled LPG in Hong Kong for the first time. The company currently spots a ROE of 20%, P/E of 13 and a long-term growth rate of 20%. The days of big capital expenditures seem to be behind them, in 2013 the company restructured some of it's RMB loans to USD and achieved a more efficient operation, translating to: Decrease of inventory turnaround from 24 to 21 days, decrease in AR turnaround from 64 to 40 days and decreased net debt to equity from 33% to 14%. NewOcean Energy is very well positioned to profit from the continued industrial growth and energy demand of the wealthiest region in China. The stock is still undervalued despite it's huge run up and was recently purchased by one insider.

Risks

- The currency fluctuations can have significant impact on their bottom line.
- LPG is a commodity, fluctuations in price could significantly impact their revenues
- The company has placed a secondary offering to finance it's expansion, the number of shares increased by 5% as a result. They could tap the equity markets in the future again, which would temporarily drive the stock price down.

The best stock screener out there is without doubt on the Bloomberg Terminal, but that's not affordable to many people, so let's look at some cheaper options:

1. Finviz.com

The best and easiest to use screener for US stocks. You can screen more than 6000 stocks based on fundamentals, technical patterns, volume, analyst upgrades, insider buying or earnings announcements. You can find stocks rising or declining on unusual volume pretty fast, with charts and fundamentals in just one click.  This comes in handy especially when you are comparing a large number of stocks based on their chart patterns, volume action or price movement. Finviz offers only a snapshot of fundamentals, so you need to look somewhere else if you need more detailed data.

2. Gurufocus.com

The go-to website for all Guru stock trades, Gurufocus offers screening the trades of famous investors, and also unique criteria like the Piotroski or Altman Z score. The whole site is focused on valuation, so you can screen based on historical P/E, P/S trends or see how companies rank compared to each other in their respective industries based on valuation. The insider buying screen is also good, allowing you to actually find stocks being bought only by CEOs or CFOs. You can view 10-year fundamentals, guru trades or interactive charts on each stock page. The free portion of the website offers USA stocks, you need a subscription for Canada, Europe, Asia and other markets. 

3. Digitallook.com

The most comprehensive screener, when it comes to fundamentals. It's especially useful due the variability of the criteria you can select, which range from share performance, valuation or growth to insider deals and technical indicators. The ranges are not hard coded like on Finviz.com, so you have more options to experiment with. The stock universe includes North America and major European countries like Italy, Germany, UK, Netherlands, Switzerland and others. Stock pages come with 5-year fundamentals, insider deals and basic charts.

4. Screener.in

The #1 stock screener in India. You can actually design your own criteria, what is really great and offers a lot of room to play. You can view charts, 10-year fundamentals, financial summaries and annual reports on each stock page or create and save your own screens and watchlists. The screener features companies from both NSE (National Stock exchange of India) and BSE (Bombay Stock Exchange), totaling more than 7000 stocks.

5. Marketinout.com

Although not as developed and comprehensive as the above mentioned screeners, Marketinout offers a huge universe of stocks, including exchanges in Canada, Mexico, Brazil, Hong Kong, Singapore, Australia or Argentina. The fundamental criteria are rather basic, but the technicals range from EMA crossovers to Ichimoku. The website is quite useful, if you are trading emerging markets stocks.

6. Financial Times screener

Worldwide screener for more than 40 000 stocks. The number of fundamental criteria is very limited, they also don't offer any technicals. Nevertheless, you can screen stock exchanges from every corner of the world and view 5-year fundamentals with an interactive chart on each stock page. Good for finding fundamental inefficiencies among developing markets stocks.

Everyone has heard the old saying: "Buy low, sell high". Many investors and traders have made millions or billions with this approach, including of course the most famous of all, Warren Buffett. But what about buying high, and selling higher? If I show you yearly charts of two stocks, stock A being down 50%, while stock B advancing 50%, most of you will automatically conclude that A is undervalued while B is overvalued. This mindset is completely wrong, but illustrates how many people think about stocks and trading these days. 

Value investing involves buying stocks at prices significantly below their intrinsic value, the difference being the Margin of Safety. Many investors mistake that concept with buying declining stocks and averaging down into them. What's even worse, they look for ridiculously low valuation multiples, strictly avoiding anything higher. This leads them into the worst stocks, automatically missing the best ones. Xerox (XRX) sold at a P/E of 100, before advancing more than 3000%, Google (GOOG) sold at a similar multiple at it's IPO, and we all know how that went. Remember, that many great stocks sell at high multiples initially, and maintain them for many years. If a stock grows it's earnings by 40% per year, the stock price has to advance by 40% for the P/E to stay constant! Consequently, what is a P/E? If I start a new business, am I concerned about the valuation multiple, or the growth of my company in the coming years? Will I not invest all my earnings into R&D, marketing and employee expenses, depressing earnings in the early years to fully profit from the future potential?  

When I buy a stock at it's 52 week or all-time high, I do so because it is undervalued according to my analysis, in other words, the intrinsic value of the company is much greater than the price it's selling for. As Warren Buffett wisely said: "Growth is merely a part of the value equation". That means you can actually find undervalued stocks selling at their 52-week or all-time highs. I remember buying Celgene (CELG) at it's all-time high of 80, buying Apple (AAPL) at it's all-time high of 430, buying BOFI Holding (BOFI) at 28, buying Altisource Portfolio Solutions (ASPS) at 52, Ambarella (AMBA) at 14, SPS Commerce (SPSC) at 25, and the list goes on... What about huge past winners like Netflix (NFLX) or Green Mountain Coffee Roasters (GMCR), which made new highs exactly as the S&P500 bottomed in 2009?  If you stop and think about it, all of the most profitable stocks in history had one thing in common: they kept rising in price, year after year, making new highs everytime on the way to the top. If I check the list of stocks making new highs, I know for sure there are huge future winners in there, I just need to know what traits to look for.

The main advantage of this approach is in cutting losses. When you buy a declining stock, and it keeps down, how do you keep your risk in check, how do you know you won't be stuck 5 years with a stock that isn't moving anywhere? When I purchase a stock at it's 52-week or all-time high, and the price starts to go down, I know for sure something is wrong, either my analysis or just the general market. In that case I get out of the trade and look for other good stocks to buy. If I keep  my losses limited to 10-15% on a bad trade, but take profits after 50-100% and higher gains, then I can strike out pretty frequently and still have a great year. The key to profitable trading is to cut your losses short and let your winners run. If you take profits after 20%, you will never score a home run and your performance will suffer. Benjamin Graham himself stated, that the profits from the GEICO purchase (he put 25% of his portfolio into the stock) were greater than all of his other investments combined.

So does buying the best stocks making new highs work? Absolutely, provided you keep your risk in check and let your winners run, which are the basic tenets of profitable stock trading. Does buying declining stocks work? Yeah it may, but why not wait until they turn back up?

The third-quarter gaming revenue grew by 11.4 percent to HK$21.06 billion (US$2.72 billion), while EBITDA 8% to HK$2.04 billion. Profit increased by 10.3 percent to HK$1.8 billion. Results are ok, but the trouble comes from market share, which declined to 24.3% from 26% a year ago. That means competitors are growing at a faster pace, not a good sign. I will be watching the stock for possible selling opportunity. The long-term fundamentals are still sound, but if Mr. Market starts beating down the stock, I want to be out!

1. Changshouhua Food Co Ltd (1006.HK)
Changshouhua Food is engaged in the manufacturing and sale of edible corn oil products under it's leading brand Longevity Flower in China consumer market, and domestic or export bulk sales mainly to other companies engaged in the sale of edible corn oil under their own brands. The company has a distribution network of more than 450 wholesale distributors, 70 retailers covering 31 provinces or administrative municipalities in China. On May 25, 2012, the Company changed its name from China Corn Oil Company Limited to Changshouhua Food Company Limited. 
Click here for Financials and Fundamentals

2. Haier Electronics Group Co Ltd (1169.HK)
Haier Electronics Group , is a global leader in home appliances, with a world market share in white goods near 8%. The company manufactures air conditioners, washing mashines, cell phones, computers and others. It is the only company in the world to manufacture front load, top load and agitator washing machines. With a P/E of 18 and estimated growth of 20%, the company remains reasonably priced.
(1169.HK)
Click here for Financials and Fundamentals

3. SJM Holdings Ltd (880.HK)
One of the six companies authorised to operate casino games of fortune and other games of chance in casinos, under the terms of a concession granted by the government of the Macau Special Administrative Region. SJM Holdings is the only gaming company with its roots in Macau, and is the largest in terms of gaming revenue and number of casinos. SJM's casinos are located in prime locations on the Macau Peninsula and Taipa Island. Gaming operations are comprised of VIP table gaming, Mass Market table gaming and slot machines. Their long-term relationships with players and officials give them a sustainable competitive advantage, which has led to a market share above 30%.
Click here for Financials and Fundamentals

4. Sun Art Retail Group Ltd (6808.HK)
Sun Art Retail Group Limited is an investment holding company mainly engaged in the operation of hypermarkets in the People's Republic of China. It operates according to international standards under two brands: the Auchan and RT-Mart. Of the new stores, 14 were located in Eastern China, seven in Northern China, 10 in Central China, four in North-Eastern China, eight in Southern China and three in Western China, while nine were operated in self-owned properties and 37 were operated in leased properties. The Company has now more than 230 hypermarket complexes and an estimated 13.6% market share in China. 
Click here for Financials and Fundamentals

5. Sunley Holdings Ltd (1240.HK)
Sunley is principally engaged in the foundation business and machinery leasing business in Hong Kong and Macau. The company works for both private and public sectors, participating in building and infrastructure projects. The business requires specialist knowledge and substantial initial and continual capital expenditures for setting up and maintaining the specialised machinery, thus creating a barrier to entry in their respective industry. Their competitive strenghts lie mainly in the experienced management and engineering design team. As Hong Kong real estate prices have long surpassed pre-crisis levels, the company has grown revenues and earnings almost five-fold in the past 3 years.Click here for Financials and Fundamentals

Haier Electronics Group (1169.HK), is a global leader in home appliances, with a world market share in white goods near 8%. The company manufactures air conditioners, washing mashines, cell phones, computers and others. It is the only company in the world to manufacture front load, top load and agitator washing machines. With a P/E of 18 and estimated growth of 20%, the company remains reasonably priced. More information