Top 50 Most Undervalued Companies for 2010 (Part 2)

China Armco(CNAM) is a distributor of iron ore that is expanding into the scrap metal recycling industry. It has just built a factory that is expected to generate $400 million in revenue, depending on the current price of scrap steel. With expected margins of 8% to 12%, we can conservatively estimate at full capacity CNAM's net income to be 32 million. With a market cap of 87 million, the forward P/E is 2.72. The main risk with CNAM is whether it is able to reach full capacity; if that occurs, this company is a gem.

Energroup Holdings (ENHD) is a quickly growing pork producer and distributor. It is currently trading at an adjusted P/E of 5. Just wait until it turns on the afterburners and increases the production, thanks to its recently added capacity. It's going to take a while for the average investor to sort through documents, but a couple 10-Q's will definitely relieve a lot of the downward pressure on this stock price.

China Kangtai Cactus Bio-Tech(CKGT) is engaged in the production, R&D and sales and marketing of products derived from cacti. With a P/E of 8 and expanding production, this stock is very cheap. The most exciting prospect for the company is its cigarettes, which are made out of cacti. With 400 million smokers in China, the target market is huge. CKGT has a sustainable competitive advantage in that there are no companies that have the amount of cacti reserves they have. This stock is smokin'.

Songzai International Holding Group(SGZH) is an undervalued coal company that is not strong in gaining investor awareness, which we believe to be one of the main reasons for its low stock price. Investors should be aware of the implications of the recent resignation of the CFO.

Weikang Bio-Technology Group(WKBT) is a developer and manufacturer of traditional Chinese medicines based in Harbin. It has grown mroe than 100% in the past two years due to acquisitions, and is trading at a P/E of only 5. Again, the lack of an IR firm may be a primary reason for the low valuation in this company.

At the time of publication, Bradford and Buckley were long all stocks mentioned in this article.

>To order reprints of this article, click here: Reprints