Longhai Steel, Inc. (LGHS)

Chinese stocks have taken a real beating as the pundits fret about a hard or soft landing, but face facts!

The Red Dragon is still the hottest growth story on the planet at a depressed 7.8% a year.

And as Beijing pumps cash into the manufacturing sector, Chinese factory names like Longhai Steel, Inc. (LGHS) are bouncing back fast!

Check out the LGHS chart gliding up an easy 50% over the last six weeks for the proof.

But even after that big move, LGHS has a LONG way to go before traders really climb the Great Wall of Worry!

You see, LGHS makes steel wire, which is then turned into nails, screws, concrete support mesh and other construction materials.

It might not be sexy but its a recession-resistant and remarkably lucrative business.

Last year, LGHS sold $608 million worth of wire and reported fully diluted net earnings of $1.12 a share.

And so far this year, 2012 earnings are tracking 36% above 2011 levels. (Read more)

LGHS has been so badly beaten up by the China bears that the P/E here is clearly well below 1 either way!

And when you factor in anticipated growth, it’s hard to imagine a value investor these metrics wouldn’t tempt!

I see a whopping $119 MILLION in assets on the LGHS balance sheet, including $4.7 million in cash.

You can do that math yourself, but if LGHS wasn’t controlled by Chinese steel magnate Chaojun Wang, it just might be ripe for an opportunistic takeover!

Maybe you’re thinking all this looks great on paper, but how do we know LGHS really has all that cash or that state-of-the-art $20 million wire factory?

For one thing, Chaojun Wang doesn’t strike me as the kind of guy who’d tolerate much funny business from lowly accountants.

LGHS is a captive customer for the hot steel billets his other companies make, so he’s got a big incentive to keep the lights on.

Skip the latte today, read the paper online and take another look at LGHS instead!


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