Baron Philippe de Rothschild once said “the time to buy is when there’s blood in the Streets.” China is still in the early recovery stages of one of the most calamitous earthquakes to ever rock the mounting Asian empire, causing a broad-based pull back in Chinese shares, and uncorking investment opportunities from the rubble.

“It’s happened time and time again throughout history, whether it be the earthquake in China or the flooding in New Orleans or the World Trade center — there is generally a market consequence,” Jim Trippon, editor in chief of the China Stock Digest newsletter, said in an interview with SmallCapInvestor.com. Trippon runs the largest equity investment research firm in mainland China and advises corporate pensions, private trusts, and high-net-worth families on their China investment strategies. “Anytime that happens, at least for the short term, there’s a pull back in all stocks, which generally creates a tremendous buying opportunity if you can differentiate between the winners and the losers.”

Even though the earthquake has shaken the Sichuan Province, the region only comprises 4% of China’s GDP, meaning there is marginal downside from a macroeconomic standpoint.

As China rebuilds, commodities, companies that produce commodities and companies who are in some fashion tied to commodities will be a lucrative space for investors to park their cash on account of this earthquake. China’s torrid growth of 10% on average has been a major source behind the skyrocketing commodity prices as the country has sought to build infrastructure. The recent earthquake magnifies that effect. Any building materials — oil, steel, timber, aluminum, copper and cement — needed to reconstruct China will benefit. 

“What’s happening right now with the earthquake is that we’re seeing demand continue to go up because they’re rebuilding,” Trippon said. “What that means for us as investors is we can realistically expect further increases in commodity prices across the board.”

The drybulk shipping space is one that will benefit from the earthquake and rising commodity prices. As China ramps up its building efforts, the demand for commodities will ratchet even higher, forcing the demand for shipping such commodities higher, thereby benefiting bulk shipping companies and most likely pushing already-soaring dry bulk shipping rates higher.

“I think you’ll continue to see strong rates in dry bulk shipping,” Trippon said. “Although you see a spike in those dry bulk shipping rates I don’t think you’ve seen the peak of it because you don’t have all the orders yet. They’re still trying to dig through the rubble. They haven’t gotten to the rebuilding stage yet.”

Trippon recommends management and consulting company China Direct (Nasdaq:CDS) as one company on the small-cap side that’s benefited from the quake and greater resurgence of demand for commodities.

“The company has pulled back from its highs and is incredibly cheap,” he said. “It’s trading right now at our calculations at roughly four times earnings.”

Since April, Trippon said the company’s earnings have doubled primarily because they expanded their production capacity, “but what’s happened since the earthquake is the spot prices for magnesium, their main product, have gone up 20% and that’s directly related to the earthquake. As you have to rebuild these areas all the basic commodities have been beneficiaries of what’s happened in the Sichuan Province.”

As a result of the earthquake’s affect on commodity prices, he has upped his target price for the full year to $18 from $15.

Aside from China Direct, other Chinese earthquake plays Trippon recommended are China Security & Surveillance Tech. Inc. (NYSE:CSR) and China Agritech Inc. (OTC:CAGC).

China Security & Surveillance makes applications for first responders in southern China and is expanding nationwide, according to Trippon. “Basically you have a situation in which you have massive devastation,” he said. “One of the first things you have to do when you have mass devastation is mobilize first responders and maintain security. That’s exactly what they do.”

Chinese agricultural technology and fertilizer company China Agritech is another Trippon favors. “In a country where they’re going to have to feed all of these people and boost agricultural output, I think they’re extremely well-positioned to benefit,” he said. “[It’s also] a great opportunity to buy now because their stock has pulled back.”

The stock has slipped from a peak of $6 in October to trade more recently around $2.03, as the company experienced a cold spell and flooding earlier this year, delaying its planting season and therefore its orders. The stock is trading at a P/E of 6.5 and Trippon is expecting the stock to double by year’s end.

Probably the biggest beneficiary that’s a direct play on the earthquake rebuilding, according to Trippon, is China’s largest cement company Anhui Conch Cement Co. (PINK:AHCHF), which trades over the counter in the United States and on the Hong Kong Stock Exchange. “You’ve got 250,000 homeless people,” he said. “All of that has got to be rebuilt. That’s a heck of a lot of cement.” The stock is still trading 30% below its 52 week high.

While there are lucrative plays that have emerged from the wreckage, it’s important to remain abreast of companies and sectors that have been braised. Although corporate victims of the quake come in all shapes and sizes in all areas, among broader areas to avoid, Trippon recommended staying away from the insurance sector.

“If you look at who’s likely to be a victim, insurance is probably the biggest sector that will get hurt,” he said. “[They] have a lot of exposure from this part of China where this earthquake occurs. They’re going to have big claims there.”

Another aftershock investors should be aware of is the amplification of already rampant inflation in the region, as growth is spurred further through rebuilding. Trippon warned of staying away from companies like crude-oil processor Sinopec Shanghai Petrochemical Co. Ltd. (NYSE:SHI).

Trippon also said if investors are combing for companies unaffected by the earthquake to look for Chinese Internet plays.