Tag Archives: Chinese penny stocks

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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American Jianye Greentech Holdings, Inc AJGH

American Jianye Greentech Holdings, Inc


AJGH Chart:

Currently Trading:  $0.97

AJGH is a manufacturer and distributor of “alcohol-based” automobile fuel products in China.   AJGH is currently selling its ethanol fuels at an incredible pace and is rapidly expanding its manufacturing capacity to keep up with enormous demand.  AJGH recently landed $75 Million from the Chinese government to build new plants capable of  ‘catching up’ to the increasing demand in China for Ethanol.

While the U.S. has been rather slow in jumping on the ethanol movement, demand for Ethanol fuels in China has absolutely skyrocketed.  Roughly 20% of all Chinese automobiles (millions and millions) currently run on Ethanol.  That number is expected to grow significantly in the near future.


In spite of the global recession, car sales in China have increased 20% this year alone, with no signs of slowing down.  In fact, China’s top 30 car makers plan to more than double the annual production of units (cars) to more than 31 million new cars per year by 2015.

The car market is absolutely surging in China.   45% growth in 2009, over 20% growth so far in 2010, and those numbers are only expected to increase over the next 3 years.   China is going through an automobile ‘golden age’ right now!


In the second quarter of this year AJGH announced expansion plans to build 2 new ethanol plants, one in Hong Kong, and the second in Northern China in order to keep up with ethanol demand.  AJGH received $75 Million in loans from the Chinese government to increase production of Ethanol!

With the numbers of new car sales increasing rapidly (more than 1.2 Million new cars per month) combined with dwindling petroleum reserves, the Chinese government has seen the importance of alternative fuel to power their rapidly growing economy.

Right now China is burning over 70 Million tons of gasoline a year, and 20% of Chinese fuel is coming from ethanol.   This means that just to SUSTAIN their growth, China needs to produce 14 Million tons of ethanol to keep pace!

Currently China only has the capacity to make 2 Million tons per year!  China needs to increase production of Ethanol by 700% per year just to ‘break even’!

This is why the Chinese government granted AJGH $75 Million in loans to build new ethanol plants!

China is heavily banking on AJGH to produce the massive amounts of ethanol needed for the country just to ‘keep pace’ with their current needs, let alone keep up with rapid growth!

This is basic ‘supply and demand!’   When supply is low, demand increases, pushing prices through the roof!   AJGH is slated to increase production by over 150% by the time their plants come online in early 2011, and China will already be burning more ethanol than local distillers can pump out.

This puts AJGH in a perfect position to capitalize on massive increases in the price of Ethanol, due the laws of supply and demand!  No other ethanol company is in a better position with the rapid growth, rapid sales increases, and the Chinese government backing them with $75 Million!

AJGH is a relatively new company.  Started in late 2009, the company went from $0 in sales, to $30 Million in sales in 6 months!    Recent third quarter earnings for 2010 we’re nearly 10 times what they were the year prior.    Current projections put AJGH at over $90 Million in sales by the end of 2010!   Off the top of my head, I can’t even think of a company that started off like AJGH!

I love AJGH’s long-term potential, as it appears that the ‘buy and hold’ investors have really been battling it out with short-term investors betting on the future of AJGH.  So far, the long-term investors are winning.

In the immediate short term, I expect AJGH to rally through the week on nothing short of spectacular earnings announcements, and would not be surprised to see it move another 30% in the next few days.

Trading was extremely strong on Monday and I see this trend continuing as more and more investors discover AJGH.  Right now AJGH is still relatively unknown, but this week it will certainly be in the spotlight, as there doesn’t appear to be any serious competition for AJGH to absolutely dominate future Ethanol production in China.

China could not be a more perfect place for AJGH as the economic/environmental situation is absolutely ripe to become a major player in China.

AJGH has enormous upside, and is still available under $1 p/share.  I really don’t see it staying under $1 for much longer.

All the indicators point to AJGH on the verge of a move this week, and the increased exposure it received yesterday is only going to bring more serious investors to the table who are looking for an undervalued stock with a ‘sky-is-the-limit’ future, like AJGH.

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