— “Ahead of the Street” Column, by Mitchell Clark, B. Comm.
In the third week of August, I wrote in this column about an exciting small Chinese company that’s growing its business providing traffic-management technology to big Chinese cities. The company’s name is China TransInfo Technology Corp. (NASDAQ/CTFO) and the business is still very much at an early stage of development.
Of course, business must be booming, because the stock has turned out to be one of the best performers on the NASDAQ. The stock is up over 40% since I wrote about the business in August and that’s without reporting any material news.
I just love the infrastructure investment theme in the Chinese economy. I don’t want to speculate on China in non-U.S. dollars, but fortunately, we have a lot of domestically traded Chinese stocks from which to pick.
For a company like China TransInfo, its business is to set up geographic information systems to help monitor and regulate the flow of traffic in cities. The company is also developing electronic toll collection technology for highways (China loves building roads).
In its last reported quarter, ended June 30, 2009, China TransInfo’s revenues increased 87% to $9.6 million. Net income for the second quarter of 2009 increased 30% to $2.8 million, with fully diluted earnings per share growing 15% to $0.13. The company finished its second quarter with $9.2 million in cash and working capital of 34.5 million dollars.
A company like this is considered very small potatoes on Wall Street, yet a lot of individual and institutional investors have bid up the price of the stock. If you analyze the stock’s trading pattern over the last several months, you’ll notice that it’s hardly experienced any downtime at all.
This stock has gone up and is going up because of bandwagon momentum traders. There is a lot of enthusiasm about the company’s business prospects, but it hasn’t reported any material news since its second-quarter earnings report. No, this stock is going up because it’s going up. This can mean only one thing — the bull market is back on.