China Microcaps: Bottoms Up
By Glen Bradford
For the most part, this entire sector has to be proven innocent as it is presumed guilty — at least up till now. In the land of short-sellers; price breeds complacency. As long as they can sell more stock and drive the price lower, it’s all gravy. And then, you may find yourself with over 40% of the float short and these stocks you’ve been able to maliciously spread rumors about gaining traction. For the last couple months, this has triggered the fight part of the fight or flight natural reaction — but you can’t fight anymore. You can’t find shares to short. Flight! You’re seeing the end to an extreme sellers market.
I’m retroactively calling stock price bottoms. These are the stocks that short sellers are going to be running from the fastest! Since stock prices are a function of daily supply and demand for the stock — this is going to generate some enormous short term demand and price appreciation.
China Biotics (NASDAQ:CHBT) – 40% of the float was sold short. Rumor and fear mongerers were all over message boards and blogs touting their latest reasons for why China Biotics smells of scam. Roth recently downgraded them and word on the street is the analyst downgrading them was at the Investor Day looking for a job with those who were long CHBT. I’m going on record saying the bottom is around $9.
China MediaExpress (NASDAQ:CCME) – A company that didn’t appeal to me until the price got cut in half and now suddenly is at the top of my radar. Shorts never did get to raid this one. They likely won’t. Rumors indicate that the company is being incredibly proactive in efforts to shake out short interest, which was roughly 37% of the float. Put me on record – bottom’s around $7.
Oriental Paper (AMEX:ONP) was the first to really get attacked full out by a firm that appeared out of thin air. It’s not even worth mentioning who they are if you ask me. My leads indicate that at this point they aren’t even sure if Oriental Paper is a fraud. How’s that for conviction? Bottom’s at $4.
Universal Travel Group (NYSE:UTA) got attacked by a DeepCapture favorite who doesn’t even reside in the USA. Talk about an ocean of safety. Short from afar and spread rumors. Again, not worth mentioning. Bottoms at $4.
Longwei Petroleum (AMEX:LPH) is expanding into the Tar business as well. Bottom’s at $2 here.
China Armco (AMEX:CNAM) is setting the floor at $3. Worden is loading up. I am too. It is worth mentioning the perpetrator here. A shout out to Tony Gentile – Crisnic Fund – Stop ripping people off and just disappear already. All my opinion. But, make sure that when you disable your index page of stockholderloan.com — you take down the rest of the website too.
China North East Petroleum (AMEX:NEP) which recently got halted is back and engaging Ernst and Young as an auditor. Out of the gate, I don’t see this going below my bottom of $4.
Back when I sat down and sorted through 10,000 companies during the last market crash, I mostly was able to remove companies from my list of companies worth owning based on basic metrics. The stocks were usually not nearly cheap enough for me to even consider buying. At this point, I like companies growing at over 30% trading at earnings multiples around 2. It’s even more convenient when I can call the bottoms. With these stocks leading the entire sector higher. I’m going to be sad to see the great opportunities that I’ve been buying into start to disappear as stock prices go up.
