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Headquartered in Shanghai, The9 Ltd. (NCTY) develops and operates online games in China. While many analysts and commentators shy away from China, a look back at some Chinese stocks over the last 12 months shows how wrong these analysts were to stay away:

Petro China (PTR) - up 62.5%
Net Ease (NTES) - 28%
51 Job, Inc. (JOBS) - 30%
Bidu (BIDU) - 61.5%
China Unicom (CHU) - 27.5%
China Life Insurance (LFC) - 206%
China Petroleum (SNP) - 73%
China Southern Airlines (ZNH) - 33%

There are hardly any China plays that have not outperformed their American peers. China Yuchai (CYD) is one exception that I came across and it too is down a mere 12.5%. Others like SOHU, SINA, Yanzhou Coal (YZC) and China Brilliance Auto (CBA) just squeezed out double digit gains.

Even China funds made huge moves:

The Greater China Fund, Inc. (GCH) - 67%
iShares FTSE/Xinhua China 25 Index (FXI) - 58%
JF China Region Fund, Inc (JFC) - 43%

So while money managers and to some extent the Cramers of the market shy away from China, I think China is a great market to be in - specially since China will only attract more capital from investors as they warm up to the idea of investing in the land of capitalistic communists.

In comes NCTY. This company is relatively unknown compared to the likes of Netease (NTES). It has a great subscription based model, but the stock has seen a wild roller coaster ride over the last 2 years. Such volatility is not uncommon to foreign ADR's, but lately the stock is seeing some strong volume thanks to a picture perfect earnings report, and is close to its all time high of 32.

Let's look at some key statistics for this company. It currently has a PEG ratio of 0.8, while earnings are growing at 70% based on the recent report. The company has beat analyst estimates for at least 4 quarters in a row and that too, quite handily, sometimes as much as 45%. Even then, the stock trades at a mere 16 times next years earnings.

I believe that while $32 is a level of resistance for the stock, it is headed for much higher ground once it breaks that $32 mark. Meanwhile, I recommend buying into lower volume pull-backs.

NCTY 1-yr chart:

Source: The9 Ltd.: Play This Chinese Online Gamer