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

Why Opportunity Abounds Where the Rest of the Market Isn’t Looking

Friday, October 18th, 2013
By for Profit Confidential

Opportunity Abounds Where the Rest of the Market Isn’t LookingIf the trend is your friend on Wall Street, it’s also the case that there are opportunities and value among stocks that have been abandoned by investors.

While the financial media tends to prefer doom and gloom, genuine opportunity in the stock market is rarely in the headlines. The focus needn’t be on what is wrong with the world; we already know that. What’s lacking is how you can profit from it.

Precious metals stocks are becoming more and more attractive these days, but I don’t think we’ve seen a bottom yet in gold and silver stocks.

Currently, some of the best risk-capital opportunities in the stock market are U.S.-listed Chinese stocks. It’s a sector that’s pretty much been abandoned by the marketplace.

The reasons why the marketplace is no longer interested in Chinese stocks are obvious, but at the height of disinterest comes the best prices. By the time interest hits and the story is in the newspapers, most of the money has already been made.

One company that’s experiencing a genuine stock market turnaround is China Ceramics Co., Ltd. (CCCL). And it’s doing so ahead of its financial turnaround, which indicates that investor sentiment is warming to the story.

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China Ceramics manufactures and sells ceramic tiles to both residential and commercial customers in China. The company stumbled both operationally and on the stock market due to China’s planned real estate restraint. The position then met the same fate as virtually all other U.S.-listed Chinese stocks that imploded on the stock market because of the plethora of accounting frauds.

But the tide is slowly turning for many of these listings and there’s real value in some turnaround trades. (See “One of the Best Agriculture Businesses You’ve Never Heard Of.”)

China Ceramics actually offers a hefty dividend and the stock is reasonably priced. Stock market action recently experienced a robust turnaround, and it very much looks like there is some new betting on the company’s operational turnaround. China Ceramics’ one-year stock chart is featured below:

China Ceramics Company Limited Chart

Chart courtesy of www.StockCharts.com

In the second quarter of 2013, China Ceramics said business conditions were picking up and that the construction sector is showing signs of recovery.

The company had to deeply discount its prices for ceramic tile to keep its market share in China’s recent economic downturn. But second-quarter sales volume was 8.3 million square meters of ceramic tiles, representing a substantial 36% increase over the first quarter this year.

With continued improvement in the company’s sales in its upcoming earnings report, China Ceramics’ $80.0-million stock market value could easily be $100 million.

With effort and persistence, you can find jewels among the stock market’s downtrodden. The key is to ignore the media and focus on individual companies and the action of the stock market.

All the opinions in the world are worth far less than knowing for yourself a company’s corporate earnings results, which companies recently hit new 52-week highs and lows, and what new companies are coming to market.

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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