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The market has been rewarding small cap stocks that are profitable, growing, and have a small cap structure.  Here are some recent results of stocks I have written on.

RINO -  Called this stock at $7.65 on June 16th.  This stock has been on an absolute tear, hitting $12.38 yesterday July 20th, for a 62% gain from my original call. Around $9-$10, mainly other stock gurus jumped on this great stock. Again, this company is on a $2 EPS run rate. Most growing, profitable, China stocks get a P/E of at least 10.

FIT -  Bought at $3.50 on May 7th.  It hit $8.19 (52 week high) yesterday July 20th for a 134% gain from original entry.

DIT - Bought at $32 on April 23rd.  It hit $49.70 yesterday (52 week high) July 20th for a 55% gain from the original call. Lowest float out there and very volatile. What is better is that DIT reported earnings this week and EPS from continuing operations was $3.11. My original DD said a $10-$12 EPS run right and it was correct. 

And last but not least, the stock I believe has the most upside and momentum potential - SKBI.

I have been buying and blogging SKBI (was SKBO.OB prior to Friday) since the $11 range.

Updated Float Analysis: Skystar has approximately 1.869m shares outstanding pre-secondary. On page 38 of the most recent S-1 , it states that between management and two funds there are approximately 1.5m shares held. On page 7 it states management is locked up for six months from the date of the secondary. After the 1.6m shares were sold recently, I am guessing that not many will flip this stock for $5-$10 dollars with this EPS potential and a P/E of 4. Depending on how many hold these shares, SKBI could have a float range of approximately 1m to 1.5m (Mid-point is 1.25m).  Also, according ot this article out, SKBI is on the naked short list .

Updated EPS Analysis:  In 2008 (see the presentation and the S-1 they did $3.07 EPS on the shares outstanding), Skystar had $5.6m of net income that included $1.1m of non-recurring expenses, or $6.7m adjusted net income.

Skystar had approximately 1.869 shares at the beginning of FY2009. They will sell 1.6m shares this week, however those shares will only be outstanding approximately six months of FY2009. So fully diluted weighted average shares for FY2009 should be approximately 2.769 (1.869 + half of 1.6m).

If I divide the FY 2008 adjusted net income by the new post-IPO share count of approximately 2.569m, I get EPS of $2.51. Skystar would only have to grow net income by approximately 20% in 2009 to have EPS of $3. However, in the first quarter of 2009, net income was up 72% YOY! It is easy for me to see how this Company could potentially do over $3 EPS for FY2009. Lastly, as discussed in my original blog post, in FY2010 expansion sales give the potential for approximately another $1 EPS. So I also see that potential for this Company to do over $4 EPS in FY2010.

Again most growing, profitable Chinese companies get a P/E of at least 10. Most do not have such a small outstanding share structure as SKBI (which can drive momentum).
With my estimated 2009 EPS range of $2.50-$3.50 and 2010 of $3-$4, a P/E range of 10-20 on 2009 EPS at the mid point of my range ($3) would be $30-$60 price per share. Combine that with a low float this stock is the most attractive out there for value/momentum. I believe hedge funds have been buying this stock and soaking up the float as they see the same potential I do.

This blog is just my rationale for my own investing and not a prediction or investment advice.  I am long SKBI and RINO.