Sector Trend: China; Watch CHNG and Ignore CAGC
Oil & Gas stocks like Tri-Valley (AMEX:TIV), American Oil & Gas (AMEX:AEZ), Rexx Energy (Nasdaq:REXX), RAM Energy (Nasdaq:RAME) and Pioneer Drilling (AMEX:PDC).
We've found nice looking technology stocks in Trident Microsystems (Nasdaq:TRID) and Ramtron International (Nasdaq:RMTR). I find Ramtron especially interesting, because I profiled the company in a recent Special Report called The 10 Most Profitable Small Cap Stocks for 2010 for members of my advisory service SmallCapInvestor PRO.
That report was released on September 1, when Ramtron was a $1.64 stock. Today, it trades for $2.34 and has been as high as $2.60. (Click HERE for more about Ramtron and the 9 other stocks in my report.)
We've watched IPOs move higher, which is definitely a trend worth following. This week's IPOs Mistras Group (NYSE:MG) and Verisk Analytics (Nasdaq:VRSK) are basically flat, which is an aberration. According to Wall Street Journal data, there's been 34 IPOs in 2009. And 23 of them are up. That's almost exactly a 66% win rate.
Another sector theme that's showing up today is Chinese stocks. China Agritech (Nasdaq:CAGC) is up 35% and China Automotive Systems (Nasdaq:CAAS) is up 13%.
Unfortunately, I can't get behind the move from China Agritech. And that's because I already have a Chinese organic fertilizer company in the SmallCapInvestor PRO portfolio. We've got 54% gains, and, in my opinion, the fertilizer stock I'm recommending has a much more attractive valuation than China Agritech, mainly due to growth rates.
Still, Chinese ag-tech stocks are a pretty good bet, as are most Chinese stocks. Another SmallCapInvestor PRO stock just missed today's Top Gainers list - China Natural Gas (Nasdaq:CHNG). China Natural Gas is up 10% to the $13.50 area. I recommended it back in May at $6.14 a share. I think it could easily hit $18 over the next few months.
Only after today's move does China Natural Gas appear to be fairly valued based on trailing earnings. And that doesn't take into account what's likely to be strong growth ahead for the company. It raised $150 million recently to expand its LNG (Liquefied Natural Gas) operations and buy eight CNG (Compressed Natural Gas) fueling stations in China.
Finally, let's keep watch on the IPO market. A couple Chinese issues coming up may do well. DST Digital Networks (proposed symbol ZSTN, expected to debut in the $7.50-$8.50 range on October 12) and China Real Estate Information (proposed symbol CRIC, expected to debut in the $11.80 - $13.80 range on October 15).
Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor PRO (http://pro.smallcapinvestor.com) and author of the book, "The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks." You can learn more about his book at http://www.smallcapbook.com.