Secret Chinese Government WTFS Connection Uncovered!

Posted by Admin on August 23, 2011 under Penny Stock Alerts Blog | Be the First to Comment

Hello and good morning to all.  Today we’ve got a penny stock that’s essentially an entire Orange Chicken platter with a side of brown rice, white rice, and even won-ton soup…for the price of a glass of iced tea.

WTFS – Xinde Technology, a company I feel is a small Chinese version of giants like Caterpillar or John Deere, is screaming value and the chart is looking pretty friendly as well.

One big difference between these US companies and Xinde is value.  WTFS is the kind of value that comes along once in a blue moon – it’s a profitable and growing company selling at a price nearly equal to its earnings.  The stock has a P/E ratio only a little over 1.  Caterpillar (CAT) trades at a reasonable 13x P/E ratio.  John Deere (DE) seems like a good value with its 11x P/E ratio. Obviously a P/E ratio of about 1 is majorly out of whack, and may not last.

WTFS is on sale now, possibly because Chinese companies have been beaten up in this market.

This is a profitable company with a history of making money.  Revenue totaled $123 million in its last full fiscal year and bottom line profits were more than $19 million.

Here is the big kicker I didn’t reveal to you yesterday.

Company CEO and President Liu Dian-jun is well respected in China.  He is a national political leader and was elected as the Congressman for his district in the People’s Congress.  He’s been honored with “China’s Outstanding Character” award.  His reputation within the industry is also very strong.  He is vice-president of the Federation of Chinese Industrial and Enterprises of China Internal Combustion Industry Association.

That’s a very powerful figurehead to lead WTFS!

Now some people out there think the Chinese government is a little corrupt.  I’m not saying I agree with that.  Although for a hundred bucks I may change my mind

Seriously though, if corruption were a problem…it probably wouldn’t hurt WTFS to have their CEO and President just so happen to have been elected to Congress.  He appears to be a socially and politically powerful individual.

I’m NOT saying that could help WTFS get awarded government contracts and I’m especially NOT saying that it could increase WTFS already enormous success when it comes to taking advantage of the massive government subsidy dollars that have helped fuel their recent profits.

Anyway…

A small company like WTFS should have a higher P/E ratio than some of the biggest stocks in the industry.  CAT had sales of about $50 billion last year and optimistic analysts think it can grow revenue by 18% next year.

Xinde may be able to double its revenue next year.  And, that’s from just one new product.

Just last month, the company got approval from its board to develop a new line of high-powered diesel engines.  They will be used mainly as marine engines, but also in engineering machines and non-road generator sand machines used in road construction.

Xinde expects to produce between 5,000 and 10,000 of these engines a year, starting in 2012.  Potential revenue from this engine is more than $150 million a year, the value of total company sales for last year!

Combined with strong sales growth in generators and other diesel engine and a $100 billion a year market in China, Xinde has potential top line growth exceeding 100% a year.

Government subsidies designed to fight inflation, a growing problem in China, will deliver another sales boost to Xinde.  Its rice transplanters, a piece of farm machinery that automates the planting of rice, reduce labor by 70% and increase crop yields by about 50%.

Farmers can make a lot more money by using Xinde’s product, especially when the government subsidizes the purchase.  To encourage increased food production, the Chinese government picks up half the initial cost of rice transplanters and other farm equipment.  WTFS gets full price for the equipment.

Income should also grow at a strong pace.  The profit margin on those new engines is expected to be above 20%.  Current margins are about 15%.

Not long ago, WTFS traded at roughly the same P/E ratio as CAT.  It could trade at that level again…and it could get there very quickly if traders get active on this stock pick and push up the price.

The chart looks like it’s starting to heat up, with the technicals starting to indicate a possible move upward could be underway.

Although near its 52-week low, WTFS has formed a seven week base, and momentum is positive.

A 7 week base formed in the midst of a market decline shows strength.  Anything can happen in this volatile market, but WTFS already sells at an unbelievable 1x P/E ratio.

Let me use that “anything can happen” as an intro to my usual warning.  This market is volatile, and WTFS is a volatile stock as well. That volatility is what can cause WTFS to skyrocket, and skyrocket quickly.  That volatility is what drove WTFS to a psychotically low P/E valuation, and could lead to extreme gains. However, that same volatility could clean out your brokerage account in a hurry if the trade goes against you and you aren’t trading with caution!

As always, use a tight stop, watch out for gaps, make sure you see upward momentum, book profits quickly, etc, etc.

Speaking of momentum…momentum has been strong in WTFS with a bullish divergence building as the entire stock market sold off.

Volume in WTFS was below average while the base formed, a good sign that the panic selling may be over.  Technical indicators that look at volume, like on-balance volume and the money flow index, indicators that show what the smart money is doing, point to accumulation in WTFS.

WTFS has a lot of upside potential.  The 52-week high is $1.40!  The fundamentals seem to say we should be there.  If the trading action heats up, triple digit gains over the medium term or even shorter could be possible.

On August 15th WTFS opened at.116 and on August 16th it hit a high of .1575 cents, offering gains of 36%!   That’s in a mere two days.  In addition to being an amazing value play, there may be strong day-trading potential as well.

Another recent run I want everyone to look at on the chart is when it opened at .101 cents on July 1st and soared to a high of .2185 on July 6th representing whopping gains of 116% in just 3 trading days!

WTFS also has a very low float, with an outstanding share count of just 55 million.  Low floats mean the stock often can run very easily and quickly when above average trading volume takes place.  A low float is one of the main things I look for when searching for a stock for one of my quadruple digit gaining after the opening bell day-trade alerts, and we’ve all seen the kinds of gains those have made.

WTFS has a little bit of everything, a low float and triple digit gains in 3 days for the extremely active traders.  Unbelievably low P/E and great growth prospects for value investors.  This is the best P/E value I can recall seeing in an OTC company all year.  Use extra caution due to high volatility, but be on the lookout for powerhouse gains in store for WTFS.

PSA – Penny Psycho

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