An Explosive Chinese Penny Stock For The New Year!

| January 13, 2010 | 0 Comments

Anyone who’s read my column knows I’m a big fan of Chinese small-cap stocks.  I’ve talked about them quite a bit in my past Dynamic Wealth Report articles.

In fact, my co-workers often joke that I must be part Chinese.

The truth is… I’m not Chinese.  Heck, I’ve never even been to China.  But, I know great investment opportunities when I see them.  It makes no difference if they’re from China, Europe, Australia, the U.S. or Timbuktu!

What’s so great about China?

China is a great place to find stocks with high growth rates and extraordinarily cheap valuations.  In my experience, this combination is a one-two punch that often leads to extremely big profits.

And in 2009, this simple formula worked like a charm.

In Penny Stock Breakouts, I recommended nine Chinese penny stocks.  Two more than doubled in value, one tripled, and another quadrupled.  The rest provided solid double digit returns.

Most importantly, not a single one posted a loss for the year.

I also recommended six Chinese penny stocks in The Penny Speculator last year.  Three of them are showing amazing gains of 385%, 230%, and 160% respectively.

I think China offers opportunities for more of the same in 2010.

China has the world’s fastest growing major economy.  It’s expected to grow more than 9% this year.  Heavy government spending, robust private lending, and a pick-up in exports are driving growth.

In fact, the economy is growing so rapidly, the Chinese government is now concerned about inflation.  This week, they raised the reserve requirement for commercial banks and increased the interest rates on short-term government debt securities.

Both measures are designed to shrink the money supply and cool economic growth.

The usual alarmists are already out shouting from the rooftops that China’s economic growth miracle is now officially dead in its tracks.  But, that’s just a load of hogwash.

The Chinese government is clearly just tapping the brakes… an effort to prevent the economy from overheating.  A prudent and timely move on their part.  They needed to take some action to prevent inflation from taking off.

And, I don’t think they’re about to do anything to destroy their economic growth.

China’s central bankers have been very clear about their intentions.  At the end of last week, they said they support “relatively fast” economic growth but need to manage inflation expectations.  Sounds to me like they’re ahead of the curve on inflation.  Clearly, they understand a gradual tightening is the best course.

With China poised to deliver yet another year of strong economic growth, I think now’s a great time to invest in quality Chinese penny stocks.  Through my research, I’ve discovered a terrific one to get 2010 off to a great start.

Introducing, China TransInfo Technology (Nasdaq: CTFO).

CTFO provides public transportation information systems technology and solutions to the Chinese government.  The company’s main product is a transportation planning information system.  It’s used by traffic management engineers for planning roads, safety monitoring, and strategic planning.

The company’s technology is in very high demand.  China is spending hundreds of billions of dollars upgrading the country’s antiquated transportation infrastructure.  CTFO’s technology systems and services are a big part of that process.

But, don’t just take my word for it.

Check out the company’s fundamentals.

In the past year, CTFO’s market cap has grown from $69 million to nearly $200 million.  The company’s nearly tripled in size.

And, this incredible growth should continue in 2010.

Revenue is expected to jump 23% this year to over $72 million.  And, earnings per share are projected to surge 35% to $0.80.  There aren’t too many companies out there with this kind of growth opportunity.

So, how’s the stock trading?

The shares are up nearly 165% over the past 12 months.  But, it still has a lot further to go.  Best of all, it’s pulled back off the high of $17.29 (intraday) set in October 2009 to provide an attractive entry point.

At recent prices, the shares are a real bargain.

The company’s five-year projected earnings growth rate is 22%.  At its recent price of $8.57 a share, the stock’s PEG ratio is a low 0.48.  In other words, the stock’s trading at more than a 50% discount to its long-term growth rate.

Based on the company’s solid fundamentals, I can see CTFO easily trading up to $15 a share this year.  That’s potential upside of 75%!

Take a closer look at CTFO for your own portfolio.  It might be a great way for you to get 2010 off to a flying start.

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Category: Penny Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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