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Top 4 China stock picks under 2

Apr. 06, 2011 10:52 AM ET
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China Carbon Graphite (OTC:CHGIis our first pick at 1.75. CHGI is benefitting off of growing demand for Graphite, especially in China.  Of particular interest here is a plant opening this spring, which is expected to double capacity in 2011.  Technically, the stock ran from .80 to 2.50 in most recent qtr...We anticipate them building off of ongoing support in upper 1's back into 2 range as they approach the plant opening.



Biopharm Asia (OTC:BFAR)  is our top turnaround candidate. The stock has fallen from 6 to .20 (yea), but has been recovering recently due in part to what we consider a smart acquistion.


Excerpt:  HBHLZY sells 4580 types of products, from 652 suppliers in China and in particular, Hubei province. HBHLZY also acts as a sales agent for over 2000 types of products...

What's interesting here is the stock has substantial revenue and earnings growth, in spite of the low pps.

Income Statement
Revenue (ttm): 156.70M
Qtrly Revenue Growth (yoy): 68.20%
Gross Profit (ttm): 38.43M
EBITDA (ttm): 34.87M
Net Income Avl to Common (ttm): 25.57M
Diluted EPS (ttm): 0.51
Qtrly Earnings Growth (yoy): 36.50%

 ...Now take cash, subtract debt and you get more than $1 a share...put 7-8 pe on earnings going forward and we could be at $2-2.50 a share



First China Pharma (OTC:FCPG) at 1.30 also looks attractive to us. Recently they landed pretty solid investment capital, which secures a major acquisition.  When this news hit, it sparked a run from 1.16 back to 1.70 mid March.


In addition, the stock has seen a string of licensing deals dating back to Dec, which are transforming them into a major player for drug distribution within China. 

Back in Dec they experienced a dramatic run from 1 to 6 range.   We momentum again developing into future acquisitions and licensing deals which we anticipate will be frequent in 2011.

•First China Pharma Targets Major South China Expansion With LOI to Acquire Large Regional Pharmaceutical DistributorMarketwire(Tue, Mar 15)

 By the way, FCPG is also quite profitable, sporting a pe of 32.


China Tel (CHTL) a bit more speculative at .18, however recently, they secured a 10mil deal in March which sparks the go ahead for their 4g wireless broadband deployment, anticipated to become the largest wireless network in China. Also they are set to monetize substantially as well, from both end users and providers, off of their fiber optic setup.  The news did spark a pickup from .17 to .27.

•ChinaTel Signs Contracts for ZTE to Supply Equipment and Services for Its Wireless Broadband Network in Fujian ProvinceBusiness Wire(Tue, Mar 15)

In addition, the stock is seeing bullish commentary from analysts Foster and Sullivan which cites rapid expansion that ChinaTel has experienced from recent acquisitions and buildout.


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