Updates on HRBN and AAAC

1) Harbin Electric (HRBN)

Here is the 6-month chart:



Notice the similarities in the chart pattern in November of 2007 and April of 2008.
That pattern brought the stock from $15 to over $22 on initial jump, followed by a larger move to $28. RSI is at the same level and going up. MACD remained in the positive territory and continues on the bullish trend. Last couple of days I began noticing a bid finally being supported with a decent size. I will continute to reiterate that $13-$15 level for HRBN will be laughable 12-24 months from today. Even for the short term, stock is becoming to look very attractive based on the chart alone.

On the company developments, I'm still waiting for an additional financial details on the acquisition they made - in terms of the financing and the dillution for the shareholders. On another note, we should see 1Q earnings next month, and the acquisition will be included in the earnings.

2) Asia Automotive Acquisition (AAAC.OB) - or what we should call it now: Tongxin International.

Well, the long wait is over. Honestly, it took a lot longer than I expected originally, but they finally came through with the merger. 85% of shareholders voted for the merger (80% was required), and thus no emergency buyout was needed, which helps, since the will need this cash to pay for the acquisition. I never expected stock to jump on the news of completing the merger, and the action today was exactly what I expected. As a reference, APWR (former CSCA) acted in the similar manner first few days after the merger, only to jump much higher later.
There are many catalysts ahead for the company: Nasdaq listing (which should come very quick, I believe), news of additional acquisition (as outlined in their presentation), PRs from the new company, and finally fantastic earnings showing what the company is all about. All these events will put this company on the radar and should gain market trust pretty quickly.

Another important thing - warrants. Calling warrants in brings cash to the company. They can call the warrants in when the common trades above $10 for 20 out of 30 consecutive days. Almost every company that went through this kind of merger (that I'm aware of) gets to call-in price. That is one of the reasons the stock will trade north of $10 in the short term.

Good luck to all!

Updates

It has been 2 weeks since last update. Sorry about that. I don't have any new picks at the moment, although there is one I'm researching now and hopefully will provide some information on it within a few days. Now, few updates on the stocks mentioned here:

1) Jinpan - JST.

Ever since coming out with monster earnings few weeks ago, the stock has made a massive move upwards. $30-$31, as described earlier, was the wall for some time. It has tried this level many times and retreated every single time. This time the breakout happened on very nice volume. The stock made an impressive run all the way to $34's. It has obviously given up some for profit taking. How can you blame profit takers from $22's just few weeks ago. These low float / low volume chinese stocks are jumping back and forth on low volume and often depend on the mkt conditions. So, short term of these kinds of stocks are hard to predict, but as far as long term is concerned, JST has continued to deliver great results quarter after quarter. Their latest outlook was for $2.64 eps in 2008, and they always provide conservative numbers (as I've noticed in the past 2 years). Very impressive numbers. Again, short term is tough to predict (it may even slip to < $30), but within a year this stock will probably trade in $40's.

2) Harbin Electric - HRBN

The bullish MACD crossover happened in the low 13's and then the stock exploded. Few days ago they provided more details on their acquisition. It looked like the mkt liked the deal. That coupled with bullish chart brought the stock all the way to its resistance and near 200 dma almost to mid $17's. Profit taking was obvious at that point. Resistance is big, plus many people wanted to get out as they did not feel safe after buying too high. Stock has retreated back to $14's now. The chart is still in uptrend, and I believe it should start going back up to the resistance point. Next event that I'll be waiting for is more financial details on the deal. It seems that they will have to issue some shares to pay for the acquisition, which looks like a bad deal at the first look (dillutive). But, EPS is accretive, which means the contribution to the bottom line will be immediate.

Dutton Associates issued a new research note on HRBN today. They've been very accurate with this company in the past 2 years. Look at their update here -> http://www.duttonassociates.com/research/HRBN/index.html.

Also, Yahoo increased earnings estimates today, because it seems that another analyst, following HRBN, increased his estimates - Global Hunter Securities.

Just like with JST (Jinpan), long term of this company is extremely bright and I don't care much about short term movements. Near $3 eps in 2009 would definitely be an eye opener next year.

3) China North East Petroleum (CNEH.OB) - What can I say? Stock has been on a monster run ever since hitting the lows in $1.60's. Few days ago it broke a huge technical resistance at $2.60 and then briefly jumped to over $3.00. It's in consolidating mode right now and may retrace to $2.60 level. If the support holds (and I believe it will), the upward move will continue towards 1Q earnings next month. Big things are ahead for this company.

4) Jaguar Acquisition (JGAC.OB) - Don't have much to say, other than the merger has been approved and look at the action in warrants. What this means is get ready for some action in AAACW.OB:

5) Asia Automotive Acquisition (AAAC.OB / AAACW.OB) - The move in warrants today came due to success in JGAC merger. That merger makes AAAC.OB merger look almost guaranteed. (although I don't really want to use that word). Warrants are lagging, but only because possible merger is still 1 week away. I'm not looking for warrants to just catch up to common. I'm looking for much higher numbers here, once the stock begins trading on Nasdaq, which should occur immediately after acquisition (IF THE MERGER GOES THROUGH, AND PENDING NASDAQ APPROVAL). I really hope come next Friday, we'll have TXIC and TXICW on our hands (these are proposed Nasdaq tickers).

Good luck and stay safe in this market!

Please leave comments on any of these stocks or markets in general.