Tag - CHNG

There's been a lot of muttering in 2010 regarding the under-performance of small cap China stocks. If you invest in this space, you know what I'm talking about. But hopefully you've made more than you've lost over time investing in China since, after all, the country has hosted some of the best performing small cap stocks ever to hit the exchanges.

So what's all the fuss about?

I’ve been pounding the table on the attractiveness of small cap stocks for so long now you probably think I’m a perma-bull. But when you believe small-caps are heading higher, like I have, a consistent message is the only way to go. Even if it means you’re sometimes wrong in the short-term.

Yesterday the Russell 2000 small-cap index broke through the psychologically important 700 level for the first time since it kissed 700 good-by back on September 26, 2008. That was the date it began its 51% plunge to a low of 343, which it reached on March 9, 2009. Well, it’s back baby. And the 104% rise took only slightly longer than one year, a tremendous rally that is sure to go into the history books.

The question investors are obviously asking right now is: can it go higher? My unequivocal answer is a resounding ‘yes’. I believe the Russell 2000 will reach 740 this summer, a level that I’ve mentioned here in Small Cap Investor Daily over and over this winter and spring.

As economic data improves, and consumer sentiment rises, stocks will head higher. Yes we need to be careful, and yes many stocks are overvalued at current levels. But there are still numerous profit opportunities out there.

Well it's about time. The markets are selling off as investors book short-term gains that in many cases far exceed the long-term annual average gains of the market. If the Standard and Poor 500 index has averaged 6% since inception in 1957, and investors have beaten that by a fair margin in just months, even weeks, doesn't it make sense to sell some shares to lock in gains? Of course it does.

Intra-day today the Standard and Poor 500 index is down 1.8%, while the Dow Jones Industrial Index is falling 2%. But the Russell 2000 small-cap index is only down 1.3%. This is somewhat surprising because usually small-caps lead to the downside when there is a sell-off. Of course, they tend to lead to the upside when the markets are rallying too. And that's why I'm a small-cap investor, the potential for big profits.

But today's market action runs counter to that trend, and the takeaway message is that investors have not lost their appetite for risk. While the selling may not be over, I find the markets movement to this point to be encouraging for small-cap investing early in 2010. The Russell 2000 could retreat back to 600 (a 4.7% decline) in the coming weeks, but it will find significant support there and frankly I think it's unlikely that such a drop is on the horizon. I'm looking for the index to bounce off 620 (a 1.6% decline) if the selling continues.

One of the big trades for 2010 is going to be natural gas. It bottomed last year and is still trading at a discount compared to oil. The oil-to-natural gas ratio is currently around 14, a huge drop from a high around 24 in 2009. Just take a look at the 6% rise in natural gas today, and it appears as though many investors, and companies, are thinking good times are ahead for clean burning natural gas. 

French oil company Total SA (NYSE: TOT) recently announced a $2.25 billion deal with Chesapeake Energy (NYSE: CHK) to purchase 25% of Chesapeake's Barnett Shale assets and to help fund 60% of the company's drilling and completion expenses in that region. I must admit, the news of this deal was great for subscribers to my Top Stock Insights and Recovery Portfolio services, since I hold the stock in both those portfolios. Chesapeake's shares have risen 28% since December 9, and 10.7% since the deal was announced on January 4.

The investment is a big bet by Total that prices for natural gas will go higher from here as the deal will provide the company with around 175 million cubic feet of natural gas production per day. That's the equivalent of 30,000 barrels of oil, an energy source that is only getting more expensive to locate.

It's certainly true that new reserves like the Barnett Shale region mean there is a lot of new gas coming on line, but power companies are increasingly making the move away from coal and toward natural gas as electricity demand increases. Natural gas is cleaner burning than coal and I expect demand for natural gas will push prices back above $10 per thousand cubic feet (mcf) in 2010. Natural gas has fallen nearly 70% from its high in 2008 and now trades for less than $6 per mcf.

*** The holidays are officially here, with lots of time for fun with family and friends!  I want to wish all SmallCapInvestor Daily readers a wonderful – and safe – holiday season. A few days off to spend with family and friends, time to reflect on past year and contemplate the year to come, is just what is needed.

This year my wife Carrie and I will be spending the holidays on the west coast with our families in Washington and Oregon.  We plan to get out to some of the Willamette Valley vineyards to see what's new in the wine barrel. I'm a big Pinot Noir fan (in fact, we named our Chocolate Lab puppy "Pinot") and love Oregon wine country.

And speaking of the holidays, I have a holiday gift for my loyal readers. You see, on Friday I’ll be reaching out to everyone with a special offer for my brand new Energy World Profits advisory service. But I want to give loyal SmallCapInvestor Daily readers an advance opportunity to start a trial subscription at a steeply discounted rate.

Normally, the Energy World Profits service goes for $399 a year, but for this weekend only I’m letting a privileged few sign up for only $199. And because you’re a long time reader of my email newsletter, well, I’m letting you cut in front of the line.

If you’re interested in how to profit from the coming energy transition and you want to grab a limited-time 50% discount, than I invite you find out more when you click here.  

***And speaking of energy prices.  Falling supply and growing demand lead to only one thing in a free market economy – higher prices. Now you can argue that the United States is moving further away from capitalism with every bill to come out of Washington, but don’t tell that to oil traders. Crude oil for February delivery is pushing past the $75.00 level today after the American Petroleum Institute reported that inventories last week fell 1.6 million barrels more than expected. Analysts had expected a drop of 2 million, but the actual drop was 3.7 million.

Last week was tough for the markets.  This morning, futures are pointing higher and generally speaking, the markets are looking to stabilize.  At least in the short term.  Like I said last week, when the markets are all over the place, I like to turn my attention overseas.  So I’ve decided to start the week off by writing more about my experiences here on the ground in China where I’ve been for the last two weeks. 

Today I’m writing about a remote area of Western China where the main business is tourism.  This growing industry in China is a sign of a rising standard of living.  The fact that many Chinese from the developed coastal cities are venturing inland to explore their own country is a positive sign of economic growth.

A few days ago, my wife Carrie and I arrived in Jiuzhaigou, China. The elevation at the airport is 11,500 feet, and on final descent from Chengdu we were able to see snow covered mountain tops. We landed at the region’s airport, a two mile long man-made plateau.  To say it was interesting would certainly be an understatement...

Time to break out your Dow 10K hats! The Dow dropped below 10,000 on October 7th, 2008. And it just made it back to that significant level today, 53 weeks later.

Don't expect the Dow to advance too much more from here though, at least in the short-term. I expect 10,000 will act as psychological resistance for a while. But longer-term  I'm expecting more upside this year and think the Dow has a shot at 10,500.

And that means there is still opportunity in the stock market: especially among small cap stocks.

As we've seen, quality small caps often make dramatic moves higher. And that's because, to quote Tom Petty, "the future is wide open" for these companies...

Despite the fears that China has a serious lending bubble exaggerating growth and threatening its economy, Chinese stocks continue to be attractive. On Friday, we noticed another set of Chinese stocks making the Top Daily Gainers list. And I introduced you to one of my favorite Chinese stocks, China Natural Gas (Nasdaq:CHNG).

It was another good day for stocks, as expected. Surprisingly good earnings from Alcoa (NYSE:AA), along with better than expected initial jobless claims gave investors the confidence to bid stock prices higher.

We're seeing a fundamental condition for economic recovery play out - confidence. I've said it before - an economic system is, at its heart, a belief system. For there to be growth, Americans must believe the U.S. dollar has value, we must be confident that contracts will be honored, we must believe our money is safe in banks, we cannot doubt that we will have jobs to provide for our families.

The financial crisis shook our faith in the U.S. banking system. Rumors of insolvency at Bear Stearns sparked a run on the investment bank that made the rumors real. The same thing happened at Lehman, but the shockwaves echoed around the world. The financial crisis was a crisis of confidence.

Now, that's not to say that the sudden skepticism of our banks was misplaced. Using obscene leverage, derivative alchemy and making some really dumb decisions, America's banks pushed themselves right to the brink. And in some cases, right over the cliff...

Oxford Industries Inc. (Nasdaq:OXM), Zumiez Inc. (Nasdaq:ZUMZ) and China Natural Gas Inc. (Nasdaq:CHNG) are among the biggest percentage gainers in Thursday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Shiloh Industries Inc. (Nasdaq:SHLO), Methode Electronics Inc. (Nasdaq:MEI), Calavo Growers Inc. (Nasdaq:CVGW), CryoLife Inc. (Nasdaq:CRY), DrdGold ADR (Nasdaq:DROOY) and Orion Marine Group Inc. (Nasdaq:ORN).

Allos Therapeutics Inc. (Nasdaq:ALTH), Amedisys Inc. (Nasdaq:AMED) and Novavax Inc. (Nasdaq:NVAX) are among the most actively traded companies in Thursday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Vical Inc. (Nasdaq:VICL), China Natural Gas Inc. (Nasdaq:CHNG), Spectrum Pharmaceuticals Inc. (Nasdaq:SPPI), Sequenom Inc. (Nasdaq:SQNM), Century Aluminum Co. (Nasdaq:CENX) and Sanmina-SCI Corp. (Nasdaq:SANMD).

Fushi International Inc. (Nasdaq: FSIN) and China Natural Gas Inc. (OTC: CHNG) are two Rising Star Stocks discussed in an exclusive online video interview with Rising Star Stocks lead analyst and SmallCapInvestor.com contributor Benson George.
 
In an exclusive interview with STRAIGHT TALK TV host Bram Solloway, George reveals why both of these companies represent strong potential in today's turbulent market. Both companies are China-based firms keyed into the infrastructure build-out of the Chinese domestic economy.