This is a reprint that was temporarily lost...
We have updated this article with a short blurb indicating if SAIC files match SEC files. We are still in the process of verifying the source and accuracy of the information we obtained.
Monday, July 26, 2010, 11:00 AM ET -
On July 6, 2010 we removed all ChinaHybrids from the GeoBargain/Special lists, pending review. We've published the majority of the results from our first round of due diligence. Thus far, we’ve reached the following conclusions for the previous GeoBargain stocks: (Please see important note at bottom of article).
Tier one: those stocks that we believe are shareholder friendly and have a good chance of exhibiting 30% EPS growth for the next four quarters:
Deer Consumer Products (NASDAQ:DEER (FIE: Filings appear not to match)
China Mediaexpress Holdin (NASDAQ:CCME) (VIE: Filings appear not to match)
New Energy Systems Group (OTC BB:NEWN) (FIE: Filings appear not to match)
UPDATE: PLEASE NOTE THAT WE CAN NO LONGER CONSIDER STOCKS WITH MIS-MATCHING PRC FILINGS AS TIER ONE,INCLUDING DEER CCME NEWN
Research notes for each one of these stories are available outlining wrinkles that, if not eventually be addressed, could impact the perception of their growth stories.
Tier two: Companies that could provide investors with stellar returns as long as dilution and/or existing financial statement quality issues do not derail the growth stories.
China Armco Metals (NYSE AMEX:CNAM) - Capital intensive business; debt to equity ratio is over 20%. We are not sure how investors will react to what we feel may be a weak 2010 second quarter as EPS is expected to significantly ramp up in the third quarter. (FIE: Files appear to match on revenues, but not on net income)
Telestone Technologies (NASDAQ:TSTC) - Account receivables and lack Cash flow generation are factors to consider; Dilution may be an issue; Has missed guidance on occasion, but recently reaffirmed as well as added net income to its guidance. (VIE: Files appear not to match)
China Wind Systems Inc (NASDAQ:CWS) - Future dilution may be an issue.
China Valves Tech (NASDAQ:CVVT) - We are not sure how investors will react to what we feel may be a weak 2010 second quarter as EPS is expected ramp up in the third quarter.
China Transinfo Tech (NASDAQ:CTFO) - Can the company achieve P/E expansion with current cash flow issues? Still, it may worth considering.
Soko Fitness & Spa (OTC BB:SOKF)- Still waiting for the company to deploy funds from a recent capital raise, but long-term goals appear in tact. Company has not issued guidance.
Research notes for each one of these stories are available, outlining wrinkles that, if not eventually be addressed, could impact the perception of their growth stories.
The remaining ex-GeoBargain stocks…
China Environmental (OTC BB:CNVP)
China Yida Holdings (NASDAQ:CNYD)
Huifeng Bio-Pharma Tech (OTC BB:HFGB)
Hong Kong Highpower (NASDAQ:HPJ)
Yongye Intl (NASDAQ:YONG)
Harbin Electric (NASDAQ:HRBN)
...will be monitored to determine if they are in a position to consistently grow quarterly EPS by at least 30%, while maintianing quality. Aggressive investors may want to perform further due diligence to anticipate which of these firms will achieve 30% EPS growth, thus making current entry points very attractive.
We are also in the midst of doing a similar analysis for GeoSpecial stocks. So far, Yuhe Intl (NASDAQ:YUII) is doing a good job addressing the market by emphasizing a goal to maintain EPS growth. According to recent articles, It also appears that its Chinese and SEC filings match.
Additionally, we have identified several additional promising ChinaHybrids stocks that we have begun to track internally.
We are not market timers so investors will have to make their own personal entry point decisions. However, the overall fear of not being in stocks is far outweighed by the reward of great returns, even if a few bad decisions are made in the process. As investors, we can focus on all the reasons not buy a stock or the solid reasons to buy. If we focus too much on the negative, we just miss too many opportunities. Current prices certainly seem well worth the risk for some exposure in select ChinaHybrid stocks as well as U.S. stocks. The big elephant still in the room is the topic of Chinese and SEC filings not matching.
***Very Important GeoTeam note. We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.
Positions: Long NEWN, DEER, CCME, CWS, CNVP, HFGB, SOKF, TSTC; Short CHBT at time of this post.
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