Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Finding a China Stock Worthy of Your Investment Dollars

Wednesday, December 13th, 2006
By for Profit Confidential

In my continual search for great stocks in which to invest, I find myself drawn more and more to China. There’s no doubt that stocks from China are high-risk securities, but, then again, so are all stocks.

Lots of China stocks are actually listed on American stock exchanges, although most aren’t doing that great. In fact, many China stocks are currently way down from their highs, and the underlying fundamentals of the businesses are weak.

What’s happened? Well, a lot of new China listings represent companies that are just too small, so they generate only token revenues.

In a bid to raise capital from an eager investor base, many Chinese companies are now listed on the North American exchanges. But they’re just too fly-by-night. The businesses aren’t well established enough to make for an attractive investment.

I’d guess that for every ten China stocks listed on our stock exchanges, only one is worthy of following.

With this in mind, here’s a stock worthy of your time. Consider my latest China stock, China Security & Surveillance Technology Inc. (OTCBB/CSCT). The company may also trade under the stock symbol (OTCBB/CSSTF), so it would be wise to double check the symbol with your broker.

The company trades on the over-the-counter bulletin board, and it manufactures and installs security and surveillance systems through its wholly owned subsidiary, Golden Group Corporation (Shenzhen) Limited. The company sells digital video recorders, home security systems, Internet video servers, and… you name it; if its related to security, this company sells it.

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One of the most attractive features of this risk-capital investment opportunity is its growth. Past growth isn’t necessarily indicative of future growth, but the company’s prospects seem solid enough.

According to the company, in the third quarter of 2006, it generated revenues of $43.4 million, representing an increase of 247% over the revenues of $12.5 million it generated in the comparable third quarter.

Net income grew 205% to $10.3 million, or $0.37 per diluted share, up from the net income of $3.4 million, or $0.16 per diluted share, generated in the third quarter of 2005.

Now, of course, a $10-million profit on just over $40 million of sales is an outstanding accomplishment. So if you’re into speculating in China stocks, China Security is worth further investigation. Before you jump right in, just beware of the high investment risk inherent in China stocks, as well as other OTCBB listings.

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Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles