Editor's note: The following article was written by Maj Soueidan, the founder of The Markets Edge Hedge Fund and GeoInvesting. Soueidan's "GeoTeam" of researchers and analysts uses fundamental criteria to analyze micro- and small-cap stocks.
NEW YORK (
) -- The avalanche of U.S.-listed Chinese stocks with the potential for above-average returns shows no sign of stopping.
Three companies that we are currently tracking are
Winner Medical Group
China Yida Holding
TMI Entertainment & Media
approved its business combination with
China MediaExpress Holdings
. China MediaExpress operates the largest television advertising network on intercity express buses in China and generates revenue by selling ads on its network of television displays installed on express buses.
This is exciting for two reasons. First, on June 25, we coded TMI Entertainment as a bargain at $7.91. We were somewhat leery of doing so because the consummation of a merger was not yet a done deal.
However, based on the company's aggressive financial performance targets and clean balance sheet, we felt that TMI Entertainment offered a nice opportunity to participate in a hot China industry sector. Based on financial targets, set by the company's management, that call for net income of $42 million in 2009, $83.5 million in 2010 and $130 million in 2011, we believe investors may
in TMI shares.
Second, the approval of the business combination justified the warrant arbitrage strategy we highlighted on
Sept. 1, 2009
The warrants saw an increase in price from 16 cents to $1.81 in roughly six weeks from our first mention. Ironically, as of Monday's close, TMI ended the day at $8.02, meaning that the warrants were still mispriced with an intrinsic value of $2.52 (warrant strike price is $5.50).