Top 50 Companies of 2010 (Part 1)

by: Zack Buckley

After researching over 5000 companies, I have come up with 50 stocks that I believe to be the most undervalued companies in the world. While I do not know where they will be going in the next year, as I cannot predict the market in the next six months, I believe in the next 5 years investors will be very rewarded by purchasing these companies.

The purpose of this series is not to go into great depth in the greatest opportunities in the world, but to cover enough to prove that listening to me in the future is worth your time. I will guarantee we’ve done much more research than my cursory summaries show. I am so emphatic about the prospects for these companies that I am going to China this summer for 3 months to visit these companies. I have created a tier system for the companies. While I think they are all great buys, the articles are tiered beginning with my favorite companies in the first article and progressively less attractive but still very undervalued companies in later articles.

My first company is HearUSA (EAR), a potential buyout candidate. It is only an 80 million dollar company, yet Siemens (SI) has 600 million euros to purchase a company and cannot purchase any company that competes with EAR. You do the math. EAR is also expanding their business across the US.

Another US company is DJSP Enterprises (OTC:DJSP), my last US company for the top 50. They service foreclosures in Florida and are expanding their business across the US. As we all know, foreclosures are sky high in Florida and high across the US. The P/E is 5 and they are expanding rapidly.

China Sun Group High Tech Company (OTCPK:CSGH) is a battery manufacturer in China with three main products: cobalt carbonate, cobaltosic oxide and lithium cobalt oxide, used in the production of lithium-ion batteries with a P/E of 8.33. For FY2008, CSGH saw revenue growth of 46% and net income growth of 27%.

Biopharm Asia is trading at a P/E of 4 and expanding quickly, with 22% revenue growth in 2008. BFAR has its own line of Chinese traditional medicines, and is also a distributor of pharmaceuticals. BFAR should now only be purchased by investors who understand the implications of the CFO resigning and that this is either a great opportunity or a great problem, and that I know that I do not know.

Skystar Biopharmaceuticals (NASDAQ:SKBI) is a fantastic company due to a strong sustainable competitive advantage they have due to being the only veterinary medicine company in China that is not a stated owned enterprise. With a p/e of 6, over 30% annualized growth, and return on equity currently over 50%, this is a no-brainer.

Biostar Pharmaceuticals (NASDAQ:BSPM) is another great pharmaceutical company with a sustainable competitive advantage; BSPM has the only government approved OTC treatment for hepatitis b in China. This may affect up to 130 million people. BSPM is expanding their sales outlets from 3,500 to 10,000 just this year. With a p/e of 8, this company is incredibly cheap both on a current and forward looking basis.

China Energy Corp (OTC:CHGY) is a 100 million dollar company divided into two business segments, their coal group and heat power segment. Their coal production in 2010 is estimated to be larger than 2008 and 2009 combined due to a change in their mining methods which changes the recovery rate from 35% to 80%.

China Biotics (OTC:CHBT) plans to quadruple revenues. While it may currently look expensive with a p/e of 23, at full capacity this company could be as low as 5.75, not to mention they expect to continue growing rapidly in subsequent years, with a potential 1000%+ revenue growth in the next 5-10 years.

Longwei Petroleum (OTC:LPIH) is a $2.20 company with $.65 EPS based on 2011 guidance due to capacity expansion. Rumors are that things are going as planned and they should be able to continue growing.

I will leave you with a somewhat speculative but extremely rewarding company. This is a 48 million dollar company with a current p/e of 4.2. Jade Art Group’s (OTCPK:JADA) mine can produce up to 40,000 tons of jade per year. That makes 128 million in revenue at full capacity. With profit margins hovering around 60%, I conservatively estimate net income of 60 million, which would put the company at a p/e of less than 1. Jada is a growing company; just for it to return to a reasonable p/e of 10 would make the stock a 20 bagger.

I advise that you look through the disclosure statement to figure out which stocks I feel are the most undervalued. You can tell this by what I own.

Disclosure: Author holds long positions in OTC:LPIH, OTCPK:CSGH, EAR, OTC:DJSP, BFAR, SKBI, OTC:CHGY, OTC:CHBT, OTCPK:JADA, BSPM