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Catch China's Uplisting Wave

Editor's note: This is the third article in a series on investing in China. The previous columns were China Investing: Like a Kid in a Toy Store and How (Not) to Invest in China.

Since June I've really been strapping myself into the Chinese uplisting rocket that appears to be taking a one-way trip. The direction? Up.

Uplisting's a required step to becoming available to more investors. What's hitting the ground running? I'll tell you.

Puda Coal (PUDC) recently has been beaten down from $5 in 2006 to 16 cents in the latest market crisis. That's down 95% in price on improving business fundamentals!

Puda Coal is reverse-splitting 1 for 7 and reincorporating in Delaware in an effort to uplist and gain the attention of some investors that will take it as seriously as I do. Now the shares are trading at 47 cents, which is ridiculously undervalued. Further note that the steel industry is taking off in China.

While I'm on that topic, take a look at General Steel Holdings (GSI - Get Report) and China Precision Steel (CPSL).

I hate talking about stocks that "popped" already, but the pop from Sino Clean Energy (SCLX) yesterday is more like pulling the choke on a chainsaw than pulling the plug on your vacuum cleaner. It's looking to reverse-split to uplist sometime in the next 180 days. Did I mention that it increased capacity by 250% and has a price-to-earnings ratio of around 8? This stock should rocket, especially because the company can increase capacity without expanding by another 185%.

Rino International (RINO), which just hopped onto the Nasdaq, also works in the steel industry where its business is focused on protecting the environment. China North East Petroleum (NEP) started trading on the American Stock Exchange last month and proceeded to fall more than 30%. Ouch! Its P/E is less than 5 and it has an organic growth of around more than 20%.

A stock I mentioned last week, China Digital (CMTP), joined the uplisting train by reverse-splitting 10 for 1 over the weekend and grabbed a new ticker symbol, changing from CHID to CMTP virtually overnight. Even though it's up 50%, it's still cheap. How many stocks do you own can you say that about?

For me, it's not a question of how fast, because I'm confident that over time, the speed at which these companies appreciate in price is going to be relatively faster than any index you could compare them with. The question is how high. I don't see these being the next Microsoft with five-digit percentage returns, but you won't see me complaining about 3% to 4% returns anytime soon. My current long-term picture is mostly dominated by four-digit percent return opportunities.

At the time of publication, Bradford was long Puda Coal, Sino Clean Energy, China North East Petroleum and China Digital. Glen Bradford is the CEO of ARM Holdings LLC; a hedge fund advisory company. He's pursuing an MBA at Purdue University and is trading his entire tuition in the stock market as well as the tuition of his roomate. His goal is to buy the most undervalued companies that are making money and set to make more money that he can find. In March 2009, he was quoted for saying, "Uncertainty will certainly work for me."

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RINO $0.00 0.00%
CPSL $0.69 2.99%
GSI $1.01 1.00%
NEP $43.83 0.97%
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