BEIJING (TheStreet.com) -- In just the past two weeks, the Shanghai Composite has retreated as much as 20% after skyrocketing 80% since its November lows.

As a result, many U.S. investors have been selling off U.S.-listed China stocks even where U.S. listed valuations are extremely attractive.

While the overall Shanghai index continues to trade at an average P/E in the mid 20s, there are still a number of U.S- listed China stocks which trade on P/E's of less than 5, despite rock solid fundamentals. And yet some investors continue to sell anything with "China" in the business description. In some cases this presents a unique buying opportunity.

In the depths of the U.S. market bottom in March 2009, there were several underfollowed cash-rich China gems that were trading at a

discount

to cash per share, despite having no debt, a growing, high-margin revenue stream and being consistently profitable. This type of trading reflects illogical panic, and it is in no way surprising that these stocks have rebounded by several hundred percent in the following months.

The bad news is that you probably missed those trades. The good news is that there are more stocks that fit a similar profile, trading at attractive valuations. Even better, for investors who think the market is due for any level of meaningful correction, true "give-away" valuations could be back on different stocks. But keep in mind, valuations like this often only last for a matter of days, so they are stocks which need to be monitored closely on the watch list.

In general, looking back and saying "if only" I had bought XYZ stock is seldom a useful exercise. On the other hand sometimes it is important to learn the lesson that we should just know better than to let an exceptional bargain trade away.

Two great examples of cash-rich China stocks that should have never reached their 52- week lows in March but did are

Fuqi International

( FUQI) and

China Sun Group

(CSGH)

.

On March 9, someone somewhere sold shares of Fuqi International at a 52-week low of $3.31, implying a market cap of only $91 million. Based on the company's previous financials at the time, Fuqi had $58 million in cash and $48 million in inventory, mostly gold -- a total of $106 million in liquid assets alone.

At that price of $3.31, investors were selling Fuqi at a 10% discount to cash and a TTM (trailing 12 months) P/E of approximately 3. All this despite the fact that the company had more the doubled revenue two years in a row, reaching $368 million for 2008.

Also keep in mind, that on March 9, someone somewhere bought those shares of Fuqi at $3.31.

On Aug. 10 (about 100 trading days later), the stock reached a high of $30.10, a gain of 809%. On Thursday, the stock closed at $24.90, a gain of over 650% and a market cap of $690 million. Looking back with 20/20 hindsight, March obviously would have been a great time to buy Fuqi, obviously.

But deciding to buy Fuqi in March

should have been

a blatantly obvious decision based on the information at the time. Buying at a discount to cash means the investor effectively gets ownership of the income stream and the additional assets for free.

Another example is

China Sun Group

(CSGH)

, a supplier of cobalt products to lithium ion battery makers. Also on March 9, CSGH very briefly traded at a

20% discount to cash

, despite being profitable, cash-rich and debt-free with exponentially growing sales and 37% gross margins. As of Thursday, CSGH was up almost 500% since March when panic selling took it to its 52 week low.

Now that they have been discovered, it is highly unlikely that these specific stocks will retest their March lows. FUQI and CSGH now belong on the "growth" watch list, not the "cash rich" list, because their market cap to cash ratio is too high.

Taking a look at current prospects, I recently highlighted

Cogo Group

(COGO)

as an attractive cash-rich China growth opportunity.

With more than $3.20/share in cash, no long-term debt and consistent profitability and margins, COGO will be represent a good buying opportunity in the low-$5 range. This week it traded as low as $5.75, a cash adjusted P/E of 2.71 times TTM earnings.

Two other names worth highlighting are

HQ Sustainable Maritime

( HQS) and

China Digitial Communications

( CMTP). I believe both of these should be "top-of-the-watch list" names and have the potential to be the next FUQI if a real buying opportunity (i.e., a short-lived selloff in the shares) emerges.

It seems that the selloff in Shanghai is putting pressure on these names now, despite the fact that their fundamentals are very attractive and are showing quarterly improvements.

HQS is a Hainan, China-based integrated producer, processor and farmer of toxin-free tilapia and shrimp that are sold to customers in North America, Europe and Asia. The company currently is trading at a price of just over $8, despite holding over $4.50 per share in cash, no long-term debt and gross margins of almost 50%. The current price of $8.04 implies a cash-adjusted P/E of approximately 4.

By traditional value-investing criteria, it is an attractive buying opportunity now, but if the price drops into the $6-$7 range, it will potentially provide a FUQI-like opportunity -- trading near cash per share and on a P/E of approximately 3.

China Digital Communication, which manufactures and distributes lithium battery shells and related products, has come off of its recent high of $4.18 and is currently trading at around $2.95. Current cash per share is $1.83 -- in other words, the current share price is supported by 62% cash for a company with zero debt, 30% gross margins and a customer base in the red-hot lithium/lithium-ion battery space.

On Tuesday at the low, a trade went through for on CMTP for $2.41, a cash-adjusted P/E of less than one times TTM and a premium over cash per share of only 30%.

Why is someone selling CMTP at $2.41, and how will he or she feel about that trade in six to 12 months? Perhaps we should ask that seller of FUQI who sold at $3.31 on March 9.

--Written by Rick Pearson in Beijing

Please note that due to factors including low market capitalization and/or insufficient public float, we consider CSGH, COGO, HQS to be small-cap stocks. The market cap for CMTP is unavailabe. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices

.

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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.