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Still Bullish On (Some) Chinese Stocks

|Includes:China Sky One Medical, Inc. (CSKI), DYP, FUQI, RCON

There's been a lot of smack about Chinese stocks lately. While you can point to a few wildly overpriced issues and argue about China's credit crackdown and its damping effect on equities, I can also point to quality value-priced issues with strong top and bottom-line growth, and plenty of cash to mitigate any credit concerns.

Three such stocks are CSKI, DYP, and RCON. Besides growth and cash, they share several other nice characteristics, such as good net margins, high returns on equity, and small floats that can only serve to force their prices much higher as their names become known by more investors.

On Thursday, Feb. 11, 2010, RCON and DYP report earnings. CSKI hasn't announced a date, yet, but they should follow soon after. While RCON's last two reports met with tepid interest at best, their growth will have to be recognized eventually, and rewarded. The stock's P/E is already less than 6. FUQI was in a similar spot back in March, with a P/E of around 4. Investors eventually caught on to their growth story and the stock was a 10-bagger six months later. While I don't hold out such high hopes for these three, I believe anyone investing in them will be handsomely rewarded later this year.

Disclosure: Long: CSKI, DYP, RCON

Stocks: CSKI, DYP, RCON, FUQI