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To those investors who were lucky enough to have been allocated sharesin the

A123 Systems

( AONE) IPO at $13.50, congratulations. For those who bought thestock over $20 in the aftermarket, my condolences. The stockpeaked at almost $21 and is now trading at $18.76.

Thanks to the many readers who sent in their comments on

my A123article

. Many readers agree with my investmentapproach, and of course may others do not.

To clarify once again whatI look for in a good investment: I look for high gross margins,growing revenue, low debt, positive cash flow and an attractivevaluation (low P/E ratio).

Needless to say, I focus on profitablecompanies only. I focus on industries that are easy to understand, andI deliberately avoid speculating on volatile IPOs or the nextpotential boom-or-bust technological miracle.

Jim Cramer correctly points out that investors can trade IPOs even ifthey don't like the company or the fundamentals. As Cramer put it, "they gave away money today." However, this is a very risky game whereyou really need someone willing to overpay for the stock more than youoverpaid for it. If you are fast, sophisticated and experienced, youmay do well at this type of trading.

Less-sophisticated investorswere the ones giving the money away if they strayed into the IPO of

Shanda Games

(GAME)

, which fell 14% Friday, the day of its IPO --despite being priced at the top of the indicated pricing range.

Some readers suggested that I do not fully understand A123's futurepotential, its "game-changing technology" or its big contracts. Idon't. I also never understood how

Sirius XM

(SIRI) - Get Report

was going to makemoney off of its business model. Despite the fact that Sirius XM hashad huge contracts, game-changing technology and a lack of truecompetition, the numbers just never added up.

Sirius XM has customercontracts with

Budget

,

Avis

,

Audi

,

Aston Martin

and others. Theyalso have had talent contracts with Oprah Winfrey, the NFL and HowardStern. None of these contracts matter if the company doesn't turn aprofit, and Sirius is now fighting off bankruptcy.

For companies likeSirius and A123, I ask myself the question: How much revenue does thiscompany need to make before it covers its expenses and generates aprofit? The answer is in the billions, and that revenue oftentimesdo not materialize.

I continue to believe that there are much safer ways to invest,focusing instead on stocks with a solid track record and strongfundamentals, which happen to be overlooked and underpriced.

Orient Paper

( OPAI) is not an eye-catching IPO or even in a flashyhigh tech business, but the company is profitable, growing revenue atdouble-digit rates, cash flow positive and trades on a P/E of lessthan 5.

To illustrate the contrast, I picked the most boring stock I couldfind, which also happens to be one of the best potential overlookedinvestments. Orient Paper is in the boring business ofproducing corrugated paper and writing paper. The company has aproven track record for revenue growth, growing by double digits inthe last three years, and is on track to continue with double-digit growththis year.

The company has only $10 million of debt and has been cash flowpositive for the past four years. OPAI recently presented at the Rodman& Renshaw China conference in New York and has hired CCG tohandle its investor relations, both of which indicate a focus onattracting institutional investors. Despite all of this, the companytrades at only four times trailing 12 month earnings --- for now.

This is a company that does not have any game- changing technology andwill not grab headlines like a hot IPO. But it is a stock you can buycheaply and easily understand its business and fundamentals and sleepwell at night owning.

The author also can be reached at comments@pearsoninvestment.com

.

Rick Pearson is a Beijing-based private investor focusing on U.S.-listed China small-cap stocks. Until 2005, Pearson was a director at Deutsche Bank, spending nine years in equity capital markets in New York, Hong Kong and London. Previously, he spent time working in venture capital in Beijing. Mr. Pearson graduated magna cum laude with a degree in finance from the University of Southern California and studied Mandarin for six years. He has frequently lived, worked and traveled in China since 1992.