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Friday, July 21, 2006

IBD will be ruled by China!!!

A timely stock recommendation after hearing from the "smartest man" in our previous post, who said that India and China will be the forces to be reckoned with in the next ten years. The stock is BBC and it produces and distributes fertilizers in China. It was recommended in the chinastockblog and by Steve Halpern, one of the players in MSN's strategy lab. It's a small stock and it's not too liquid so it can go up or down 5% in a day... it once fell 36% in a day because of rumors that a key executive is sick and road construction will delay product deliveries, both of which turned out erroneous. A risky stock but it will fit in nicely with a well-balanced portfolio of defensive stocks (given the market today) looking for some growth dimension. Earnings for 06 are expected to grow 97.9% and the stock is trading at 13x P/E. Assuming 07 earnings growth is just half of what is expected this year or 48.9%, the P/E will drop to 8.7x which is even cheaper! If it reaches $15, the stock should easily rank no.1 in IBD in terms of growth! But only take a SMALL position in this RISKY stock. What follows is Mr. Halpern's take on the stock.


The company is Bodisen Biotech, which is slightly misleading as it really has nothing to do with biotechnology. Rather, the company sells organic fertilizer in China. With some 900 million farmers in China and a total fertilizer market in China estimated at $17 billion, this strikes me as an intriguing opportunity.

The idea for this stock originally came from Ian Wyatt, editor of The Growth Report and SuperNova Stocks, and a specialist in uncovering smaller, undiscovered growth stocks that do not yet appear in the financial press, among other newsletters, or on Wall Street's radar screens.

Says Wyatt, "Bodisen, based in China's agricultural hub, produces environmentally-friendly fertilizers designed to increase crop yields and decrease China's dependency on imports, as mandated by the government.

"Chinese officials are actively pushing for the farming sector to implement organic methods that will increase production and decrease soil toxicity. We believe the company's financial results and the possibility of stellar growth offers investors a rare opportunity at an outstanding valuation. Its growth potential appears immense."

And while the stock price has not yet reflected the company's positive news, the developments in recent months appear very favorable. In its last quarter, income rose 181% on a revenue gain of 124%. The company also recently reaffirmed "record guidance" for the soon-to-be released quarterly numbers.

In addition, to date the firm has been the leading player in western China and recently announced its first venture into the northern province of Xinjiang, the largest agricultural province in China. The shares were also recently added to the Russell Microcap Index.

Meanwhile, the stock is down from a high in February of nearly $22 a share.

I'd add that with a float of under 11 million shares, there are nearly a million shares sold short. However, a second consecutive quarter of triple-digit growth in earnings and revenues may very well be the catalyst to force shorts to cover.

Although this probably goes far beyond what is needed for fair disclosure, I would note that I often suggest stocks to friends, family and associates and some bought these shares in recent months on my advice, at prices both above and below current levels. Meanwhile, with my portfolio currently very heavily focused on portfolio hedges and more defensive larger cap stocks, I clearly have some room for a few high-risk speculations with the potential for significant upside gains. For those willing to incur high risk in exchange for high potential reward, add Bodisen Biotech to your list.


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