Following its recent run-up from below $3 to nearly $5, the company is currently valued at a $260 million market cap despite making only a small profit in one of the past eight quarters. Despite the hype for batteries, this is a stock that should be avoided by investors who focus on fundamentals.

Hong Kong Highpower also has enjoyed a spectacular run-up due in large part to the A123 IPO. The stock was trading at $1.38 in August and now trades in the $4 range. The stock looks intimidating based on its trailing 12-months price-to-earnings multiple of 30 times, but this doesn't factor in HPJ's huge growth potential.

The company recently signed a contract with Siemens Gigaset Communications to supply batteries under the Gigaset name in Europe. This demonstrates some concrete progress in the company's transition from being a supplier of nickel metal hydride batteries into a producer of higher-margin lithium-ion batteries.

The current wave of good news is already factored into the share price, but there could still be room for more upside if Hong Kong Highpower reports very positive quarterly results. The company already put out an interim report saying that sales for July and August are up 8% vs. the comparable period a year ago.

The positive results for Apple and Hong Kong Highpower bode extremely well for China Digital Communication Group ( CMTP.OB). The company derives 68% of its revenue from lithium ion batteries for hand-held consumer devices such as MP3, MP4 players, cell phones and cameras. Despite significant revenue growth, the company still trades at around $9-$10, sporting a trailing 12 months P/E of only seven times earnings. As a result, any positive surprise in earnings could put this stock up close to the $20-$25 mark, in line with HPJ. The company has gross margins in excess of 30% and over $10 million of cash with no debt.

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