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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

A Chinese Stock to Watch

Stocks in this article: CHGI.OB SCLX.OB NEWN.OB

New Energy Systems (NEWN.OB), SinoCoking (SCOK) and Sino Clean Energy (SCLX.0B) were all stocks that traded at a significant discount to their fair value and subsequently skyrocketed.

China Carbon Graphite (CHGI.OB) has the potential to be the next stock to skyrocket.

In August 2009, I received an email from a New York-based hedge fund manager who was holding a very large position in a small-cap Chinese maker of lithium-ion batteries based in Shenzhen. He was concerned that this opportunity was "too good to be true."

He told me that the stock was trading so cheaply (at $2 and only two times earnings) that there could only be two conclusions. Either the company was a total fraud or this was the buying opportunity of a lifetime.

I arranged a meeting with management and booked a flight to Shenzhen where I toured the factory and met with the CFO, the CEO and the head of sales. As it turns out, I was very impressed by the company and by management. The factory was clean, well-organized and production was humming along at a busy clip.

I provided the hedge fund manager my conclusions and subsequently "loaded the boat" myself, buying all the stock I could get my hands on. In subsequent months, I continued to provide suggestions to management on how they could improve their capital-markets profile and I introduced them to a number of other investors and investment banks who could hopefully provide research coverage in the future.

Since then the company has completed two major acquisitions, announced its intention to uplist, begun a proactive IR campaign and made a presentation at the Rodman & Renshaw conference in Beijing. That company, New Energy Systems, subsequently traded from $2 to $10 and now trades at around $8. This stock wasn't "too good to be true" but rather was "too good to pass up!"

Just a few weeks ago, a Chinese friend in Beijing told me that I really should take a serious look at Sinocoking, which had just come to market via a reverse merger on Feb. 5. The reverse merger came with a concurrent PIPE where SCOK raised $7 million at $6 per share and investors received additional warrants at $12 per share.

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