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My chosen name "Stockgod" was something I used when I was quite young and I've used it on various sites and chatrooms for a long time. I don't think I'm a "god" of anything at all. I am an entrepreneur, investor, strategy & brand expert. I've been investing in the stock... More
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BullsOnWallStreet
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  • NEP a Serious Powerhouse from China.  8 comments
    Oct 9, 2010 2:16 PM | about stocks: CNEP, CCME, PTR, LIWA


    This is my first blog on Seeking Alpha.  As the creator and one of the co-founders of
    BullsOnWallStreet we thought Seeking Alpha would be a great place to post our free content... and there will be much more free content going forward.

    China North East Petroleum (NYSE:NEP) is just starting to wake up as people realize that their forensic audit is behind them.  It had a great run from sub $4 where many of us initially participated, rode it to $11, and then the stock churned for awhile around $9 until it was halted at $5.50 over the summer.  Since then we saw it reopen at around $4, and it shot up to $7 in no time where it’s been churning, establishing a new base a little over $6.

    Many people lost faith in China small caps as a result of the shenanigans that NEP went through, yet those who took the time to understand what's really going on and made significant gains since the halt.    As many who follow me on Twitter know I have an absolute whack of this stock, and I purchased an additional whack over the summer from private shareholders. For another blog, at another time I will share why I had no trouble sleeping over the summer when the stock was halted.  

    U.S. GAAP accounting rules are a challenge for Canadian companies to fully understand, let alone China companies.  I've been investing in Canadian small caps for almost 2 decades and I see this type of thing often.  Many Canadian small caps don't even bother dual listing until they reach a certain size.

    The good Chinese companies appreciate access to the U.S. capital markets and are doing everything they can to build and/or rebuild credibility by hiring one of the "big 4 auditors" and dumping their small China based accounting firms.

    As we have witnessed most of the China small caps faced non-cash warrant account issues. Of course NEP had other issues, they did not properly account for the depreciation of their properties, and there was a scare with how they handled “business development” funds without proper controls.  

    Very recently NEP hired Ernst & Young to help them build sustainable US acceptable auditing practices.  This was a great move to show they are committed to staying compliant, they are for real.  NEP has real contracts in place with Petro China and they are growing thanks in part to the drilling company Tiacheng that they acquired last year.

    Their recent announcement is pretty bullish, NEP is drilling 100 new wells in inner Mongolia for a new customer, Beijing Junlun Runzhong Technology.

    ..however, NEP needs more than just drilling revenue to make me happy.  NEP needs new leases with Petro China and/or new wells outside of the current deal structure.  

    Few people love extreme volatility, and China Small Caps are some of the most volatile stocks available.  In my opinion NEP needs the following to go into double digits and remain there;

    • New leases with Petro China and potentially other companies.
    • They should pay a dividend, a stock buyback is okay for a booster shot but they need to do something for long term shareholders.  Ian Cassel wrote a great article on the power of a dividend for Chinese companies.    
    • Better communication with their shareholders (you can’t get much better than absolute zero communication right?).  Fire the existing IR firm if they continue to ignore shareholders.  Bill Zima, if you’re reading this, you’re on notice.  We won’t put up with no communication for much longer.

    Until NEP implements some of the above I think we will continue to see volatility.  I think we've seen the bottom when it re-opened, and it will be a climb back to $9..  but I won't be excited until we see double digits, sustainable double digits.

    So best wishes to all, as usual.  As I mentioned on the BullsOnWallStreet Blog on September 28 “If you see NEP in the 4's it's a highly probably trade to the 5's and above!”.  Congrats if you did it!


    Disclosure: Long NEP
    Themes: Oil, China, China Small Caps Stocks: CNEP, CCME, PTR, LIWA
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Comments (8)
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  • JoTeng
    , contributor
    Comments (363) | Send Message
     
    I own NEP and am quite satisfied that it will continue to be a money maker going forward.

     

    That being said the single best stock to own right now in the China small cap sector is LongWei Petroleum, (LPH).

     

    On target to generate over 1/2 billion dollars in revenue in the next 12 months and it is only at 38% capacity in regard to the distribution systems in place and fully paid for.

     

    This is one of the very big plays going forward.

     

    Closed on Friday, (10/08/2010) at 2.58 and then traded 78 thousand shares in AHs to close at 2.77.

     

    Q1, 2011 earnings due on 11/15/2010 and it is a lock to be the biggest revenue and profit Q yet.

     

    10-K info from a few weeks back.
    finance.yahoo.com/news...
    9 Oct 2010, 02:46 PM Reply Like
  • stockgod
    , contributor
    Comments (30) | Send Message
     
    Author’s reply » I think LPH is a good company, originally bought this stock at .90, but my only concern is the fact that I think they need cash to grow. I've said this before, I don't like their previous raise, it was done with terrible terms, at a really low price.. Expect another raise soon, either way it does look okay as a trade. Not sure if I'd bank an investment on it though, I think there are better speculative investments for under $2.
    9 Oct 2010, 03:09 PM Reply Like
  • JoTeng
    , contributor
    Comments (363) | Send Message
     
    StockG:

     

    I appreciate the civil discourse but have a 180 degree difference in opinion on LPH.

     

    In regard to the last "terrible terms" raise.

     

    The stock is up 150% since then so it could not have been that bad.

     

    In addition, LPHs cash flow is tremendous right now as is their position in the markets they serve.

     

    There is no reason to think they need to raise cash, none.

     

    In any event, congrats on the blog and i will be a regular reader!
    9 Oct 2010, 03:43 PM Reply Like
  • stockgod
    , contributor
    Comments (30) | Send Message
     
    Author’s reply » JoTeng, allow me to go over LPH again, I shall do a detailed deep dive soon enough. I have enough people bugging me about it often enough these days, maybe I'm missing something.
    9 Oct 2010, 03:45 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    I owned NEP last year and made over 130% - what a luck fool. Now, I have woken up and smelled the fraud. You have any actual evidence that this company is not a fraud?
    13 Oct 2010, 01:14 PM Reply Like
  • stockgod
    , contributor
    Comments (30) | Send Message
     
    Author’s reply » Ya, I read the audited numbers. Do you have proof that it IS a fraud? :)
    13 Oct 2010, 09:55 PM Reply Like
  • Business Economics Analyst
    , contributor
    Comments (2562) | Send Message
     
    Reading the audited numbers is not sufficient. No, I don't have proof the company is a fraud. I haven't studied the company for that purpose. However, my instincts and suspicions are that it is fraudulent, so that is the first question I would ask anyone who is pumping the company. Have they eliminated the possibility that the company is a fraud? Since you haven't done that, I would consider your article pumping the company not to be of value.
    14 Oct 2010, 01:02 AM Reply Like
  • Anti-Stockgod
    , contributor
    Comment (1) | Send Message
     
    @stockgod pumping his own book - does this surprise you ?
    14 Oct 2010, 10:58 AM Reply Like
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