Fire Up These Chinese Coal Companies

Songzai International (SGZH.OB) has a trailing price-to-earnings ratio of 3.2 and is also engaged in coal production in China. With 25% of its market capitalization in cash, some would argue it's cheap. Also combine that with Songzai's reported double in sales and net income year over year during the last quarter.

Songzai currently trades at prices that are uplistable and mutual fund friendly. I think that's where the company is headed even though it's made no public statement. I would categorize this as a "no-brainer" because I think that it doesn't take much of a brainiac to figure out that this stock is being given away.

L&L Holdings (LLFGH.OB) gives off the distinguished aroma that I call uplist. Yes, it too is in the business of coal mining in China. Note that this is 100% personal speculation, but my instinct tells me that I'm hot on the trail. My instinct tells me that uplisting is coming in the very near future. Who knows? What I do know is that L&L appears to be an acquisition machine in the perfect market to acquire. It's priced to stagnate and grew revenue 70% last year. The company is cents away from being mutual fund friendly.

The trick to buying undervalued companies, in my opinion, is buying them before everyone else realizes what's going on. It's kind of like bargain shopping for sports cars -- something you probably don't do every day. Odds are that you don't see a brand new Lamborghini or Ferrari for sale. But say that you do. Say that it's priced at $10,000. Are going to wait for the next person to walk by or are you going to fire it up?

-- Written by Glen Bradford in West Lafayette, Ind.

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