Storm approaching...

Tropical Storm Fay is approaching Florida, where I'm residing, but I'm really talking about the market here... :) It's nice to have a job of a weather forecaster. I love how they are saying: "There is an over 50% chance of Fay becoming a hurricane", which could pretty much mean there is 51% chance it'll be a hurricane, and 49% chance it will stay a Tropical Storm. Let's apply this to the market - "There is an over 50% chance of DOW closing positive tomorrow" :)


We've been seeing lots of +200 / -200 DOW swings in the past few weeks, but after all dust is settled, we are still trading in the same range. So, where do we go from here? I haven't changed my mind yet. Still believe we'll see 13k by late Sept / Oct, so I see a "big storm" coming into the market in the next few weeks, but I think this storm will be a disaster for the shorts. Shanghai market went below 2500, but judging how it's selling off, it seems like a capitulation is almost here...You rarely see 60% pullback on anything that went up, but here we are talking about pretty strong economy. All statistics point to a nice recovery in the next 6-9 months.

Now, back to our undiscovered stocks, as there have been plenty of news last week:

HRBN (Harbin Electric) - earnings were great. Conference call wasn't that great. I think they should work on the conference call a little better, as some of the explanation provided wasn't understood correctly by many. Anyways, stock did not give back its gains, instead continued its slow move. It was nice to see it work through $16.00-16.25 resistance. Chart still looks great. There are other resistances on the way - $17,00, $17.72... Nothing changed in the long term of the company. They just confirmed that the long term look very bright here.

AFAM (Almost Family) - did what I expected - dropped huge on simple profit taking one day. It deservers a 50/50 weather forecaster statement right now, as it's hard to predict what will happen now. Profit was made, off to the next play. No more updates on this one.

TXIC (Tongxin International) - still nothing to see here, except it it seems that IR is starting to inform the public a little more. Telling us when the earnings were going to be released is a start. China Auto Market has slowed down a bit, but still strong, and nothing compared to US market.

YTEC (Yucheng Technologies) - nice gain from $11's to mid $14's, but the "buy rumor, sell news" took its toll. I actually didn't have a chance to go over earnings today. Will analyze later to see if it's worth getting back in any time soon.

MAQ / MAQ+ (now GSL / GSL+) - completed its merger resulting in a nice gain for the warrants from around $1 all the way to $1.60. This was somewhat risky play, as you deal with warrants, where you can lose all your investment if merger doesn't happen, but the merger was nearly 100% guaranteed. Still keep an eye on this stock and warrant, as the resulting company is very interesting.


Similar type of play is happening now in FMGQ.OB / FMGQW.OB - another interesting merger, which most likely will happen as well judging by today's PR ( http://biz.yahoo.com/bw/080818/20080818005595.html?.v=1 ) , resulting in a nice gain for the warrants, as the strike price is $6.00 (so, it might get to $1.50-1.60 sometime after the merger). Once again - very risky play. Only play with warrants if you are ready to lose your entire investment in them.

Another new stock:

Few weeks ago I briefly mentioned a new stock to watch - SRRY.OB.
I believe this one may appreciate nicely in upcoming months.
Take a look at this latest earnings release:

http://biz.yahoo.com/bw/080818/20080818005365.html?.v=1

This company is a rapidly growing environmental services and waste recycling company, with operations in both China and Australia. And China Operations are growing at a very nice pace. Just look at this revenue numbers: "The Company generated record 2008 second quarter revenue of $2.94 million, a 251% increase compared to $0.84 million in the 2007 second quarter". This is despite some shutdowns due to the earthquake.

Gross Margin increased significantly (from 20% to 48%). Finally:
"2008 net income for the first six months was $1.03 million, or $0.05 per diluted share, compared to a loss of $(0.22) million, or a loss of $(0.01) per share in the year ago period. The Company expects to generate 2008 revenue of between $11 million and $12 million and net income between $2 million and $2.1 million and $0.09 to $0.1 per share."

Basically, they are trading at PE of 5 right now. $1 is not out of the question here for the short term. Long term - who knows how far they can take it with this phenomenal growth. More to come on this stock.....


That's it for today. Off to watch the weather forecasts :)