Bromine and related chemical products are widely used in oil and gas exploration, papermaking and as industrial refrigeration chemicals, among other uses.

Small Cap Stock Pick #1: Aladdin Knowledge Systems (ALDN)

ALDN broke out from the horizontal resistance mark around $10/share Monday on heavy volume in the face of a collapsing market. This breakout suggests a possible move to fill the gap in the low 13 area which implies a possible 30%+ potential gain here. Looking at ALDN's numbers, the company expects some very strong earnings growth, nearly 75%, in 2009, which is quite significant as we don't see these kind of estimates very often in this weak economy. Analysts are expecting $0.68EPS in 2009, which gives ALDN a future fair value among its industry peers of $16.10/share compared to its closing price of $10.17 on Monday. I'm long at $10.06.

In May last year, when the share price of Gulf Resources (GFRE.OB) was trading at around $1, the company entered into a standby equity distribution agreement with several private investors to sell up to 60 million shares at $1 each. Announcement came Thursday that this agreement, which has never been put in effect, has now been scrapped. The reason is obvious - GFRE's share price is now trading at above $2.50, and a $1 offering would represent a criminal 60% discount. So this is good news.

The real question is, why not vary the agreement and change the price to, say, $2.50? I like the idea of a standby agreement because it is a ready-made mechanism for the company to tap into, as and when cash is needed. In fact, Thursday's press release did mention that the company "has decided to pursue more cost efficient funding sources". But isn't varying the strike price the simplest and most cost effective way? In fact, the price doesn't even need to be fixed, but could be based on a formula that is related to the market price.

1) News broke on Friday that the Chinese authorities will now curb the industrial use of corn to prevent soaring food prices. This will clearly affect ethanol producers, but how will it impact Shengtai Pharmaceutical (SGTI.OB), a company completely dependent on its use of corn to produce corn starch and glucose? And even if this doesn't apply to SGTI, isn't rapidly rising raw materials cost bad enough?

2) China TransInfo Technology (CTFO.OB) dropped a bomb last week by announcing that it will be restating its Q2 and Q3 figures as there appears to be a "decrease in the fair value of accrued warrant liabilities". The 8-K filing was short and cryptic, giving us little clue how this will affect CTFO's earnings. Is it any wonder that the company shares traded down over 13% on Friday?

Well, finally! It's been a long long wait for investors as China Pharma Holdings (CPHI.OB) languished with no IR firm and little visibility. Hopefully things are going to change. But how does HC International stack up as an investor relations outfit? Well, let's see.

At last count (and this may not be exhaustive nor completely up to date), HCI represents the following C.O.P. companies: China Housing & Land Development (CHLN.OB), China Solar & Clean Energy (CSOL.OB) and Gulf Resources (GFRE.OB). Let's examine them one by one.

Over the weekend I began to get hits on Gulf Resources (GFRE.OB) and was wondering why. The news that came Monday morning clarifies. The company announced that it is ready to start commercializing its new oil drilling fluid system, which has not only been recognized by the three oil majors in China (Sinopec (SHI), CNOOC (CEO) and CNPC), but has already obtained an intent to purchase from CNPC's subsidiaries.

This is a big move. GFRE is comprised of two wholly-owned operating companies - SCHC and SYCI. Until now, SCHC, a major producer of bromine and crude salt, has been the more visible entity, being the largest manufacturer of bromine in China with a 15% market share. In contrast, SYCI, a maker and distributor of chemicals used in the oil & gas, waste management and paper-making industry, was the ugly stepchild, useful but quite unloved. Not anymore. With this new drilling fluid system, SYCI will be operating in the an area that overlaps oil with an environment friendly offering in China. How hot is that!