To OTC Journal Members: 
 

All Things China

The day will come when buckets of the world's growth capital flows into Chinese companies with US listings. It will be the next big bubble.  I can't wait, but I can wait. I can't wait, because I want to realize the vision. I can wait because I don't own enough China situations to capitalize properly. I need some time to accumulate and position, so if it's delayed a bit as the world claws its way out of its current economic quagmire, all the better for me and you.

The time will come when those who have paid attention to these ideas and participated in some of the huge gains ahead will make the fortunes of a lifetime. It might take a year or two for this bubble to inflate, but as the markets become more comfortable with the numbers being generated off the broad shoulders of the largest emerging consumer class in history, there will be a lot of money made from both growth and margin expansion.

Here's a few snippets I've pulled out of recent publications of late on China:
 

The Universal Travel (AMEX: UTA) Template

Motley Fool has been the new town crier for OTC Journal idea Universal Travel of late. There's some interesting parallels setting up to another OTC Journal idea, and they are worth looking at. 

Here's a chart of UTA highlighting some of this year's benchmark events. Note the 3 for 1 reverse stock split back in late March. The stock begins to trade a bit better, than a full two months later on May 26 the stock obtains an upgraded listing on May 26th and finds its way to the AMEX.

On May 26th the stock was $5.80. On August 4th, the stock hit a high of $17. Ten weeks for 193%. Wow. A bit of turmoil since then, but the upgraded listing expanded the audience considerably, and the stock just flew up the charts.

Of late, the Motley Fool has upgraded UTA to a "four star investor rating"- whatever that means. It's some sort of investor survey. In short, investors are becoming far more comfortable with this idea, and my $20 price target still stands.

However, my preference is to find these ideas when Motley Fool either doesn't rate them at all or gives them one star, and then be a seller when the idea gets some sort of four star rating. It takes patience, courage, foresight, and a bunch of luck. 

Universal Travel has become a giant success story out of the microcap world, and along with the likes of AIG (NYSE: AIG), Priceline (NASDAQ: PCLN), and Ctrip (NASDAQ: CTRP). All successful reverse splits. Following the template is:
 

NF Energy (OTC BB: NFEC): Well Into the Process

Hoping to following the UTA template is OTC Journal success story NF Energy- formerly NFES, now NFEC post 3 for 1 reverse split and still on the OTC Bulletin Board.

NFEC was out with a pre open news item today which sets the stage for the remainder of 2009. The company disclosed a forecast of $24 million in revenues for 2009, up from 52% from the $15.8 million it achieved in 2008. Coincidentally, UTA's growth rate is right on the 50% mark as well.

NFEC did not provide a profit forecast, but we can come up with a reasonable forecast based on trailing margins. 

In 2008, NFEC delivered $15.8 million in revenues and $4.4 million in net profits- that's 28% net margins.

Therefore, if NFEC delivers $24 million in revenues in '09, the net profit would come in around $6.7 million. Post reverse split there should be about 14 million issued and out, suggesting about $.48 in net Earnings Per Share for CY '09.

A very reasonable 15 x '09 EPS would put the stock around $7.20 per share without any real multiple expansion. If China stocks start garnering something more akin to US multiples, you'd be looking at the stock trading more like 25x EPS, or in the $12 range. And, of course, there's growth opportunity as well. The stock could go up if you hold it simply hold it for a year as the company grows.

Based on today's disclosure, $7 is a reasonable price forecast in my view- about 47% higher than today's trading level. I'm looking for it this year. I'm hoping this company follows the UTA template, gets some sort of upgraded listing, better institutional sponsorship, and a lot bigger audience.

The numbers suggest the company has earned this kind of following. With any sort of luck, the market will follow. It's worth noting my first publication on this one was in June at $.69 (split adjusted $2.07). More than a double up to today, but just the beginning in my view.

The chart shows a nice incline up to the recent reverse split. Since then, NFEC has been in a bit of a low volume pull back phase. Price appreciation comes in clumps, and low volume pullbacks are the ideal time for smart investors to accumulate. We're in that kind of time right now.

This company has vital energy saving technology and strong ties to its regional government. The Chinese government is pumping billions into energy saving. We're seeing the future. UTA was the template. The future is now. 

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