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Chinese Petro Company Poised to Go Higher

Stocks in this article: LPH

NEW YORK ( TheStreet) -Nobody apparently is listening. That's fine. That's about what you'd expect when you find something that actually is undervalued. Louis Navellier allegedly just left the building. He'll likely be back.

It's funny to me that this particular company - Longwei Petroleum Holding Limited (LPH) -- is getting sold off. Take a look at how fast it's growing. What kind of multiple you'd pay for this kind of company?

The analyst report from RedChip suggests that eight times earnings is what you should be willing to pay. That's $5.20. Look, I'm not going to poke fun at analysts, but any mutual fund manager would love to buy a stock growing this fast at more than 16 times earnings.

You want catalysts? I've got a few.

  • Crude oil prices are rising. Not only that, but in terms of U.S. dollars, they are going to increase from here as we are currently at peak oil levels. Energy demand in China is going to squeeze oil prices higher there and especially in the U.S. Get ready for it.
  • Global money flows to China. Where is money going to flow globally? China. Why? Because they are raising interest rates --- and this attracts investment capital. Not to mention that the Shanghai and Hang Seng still have upside to their markets before they are overpriced. If Longwei listed on one of those exchanges, it would likely sport a 30 times multiple or greater.
  • Expansion to a new facility. It's likely to happen in the next 12 months.
  • The yuan will rise against the dollar. Longwei earnings will be magnified in terms of dollars as this happens.

Besides, who wants to invest in the U.S. Treasuries when they can invest in yuan-denominated securities that will likely be revalued higher when the Chinese lets the yuan to float? I said you should be shorting U.S. Treasuries a while ago using something like ProShares Ultra-Short Lehman 20+ Year Treasury ETF (TBT). That's still a great investment thesis but honestly making tens of percentages is a joke when you can make hundreds of percentages.

At the time of publication, Bradford and his investors were long LPH common, LPH preferred, and LPH warrants.

This commentary comes from an independent investor or market observer as part of TheStreet�s guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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