Posted by Admin on August 22, 2011 under Penny Stock Alerts Blog | 
Hello once again everybody. Boy do I have a very unique and
hot penny stock for you today!
Let me start off by saying LSTG has been amazing. During the extremely rough days, LSTG still held its own remarkably well, especially for an OTC company. Today with the markets only making a very slight leap up of well under 1%, LSTG moved up almost 10%.
LSTG was listed at 80 cents when I sent the alert last Sunday and today hit $1.15 for a gain of almost 44% total in a week!
That’s amazing, especially in this market.
I’ve seen a lot of other newsletters out there talking about LSTG, which I told you I believed would happen.
All I asked in return for this shiny diamond was that you remember who told you about LSTG first. If you don’t believe me, take a look at the chart. LSTG didn’t start trading actively until the day after my Sunday alert!
LSTG was able to rise due to the hotness of gold, but I also believe LSTG was able to succeed mostly due to the fact that investors saw that it could potentially be extremely undervalued.
Since that brought us our latest winner, I went on the hunt for another case of massive undervaluation, which brings us right to today’s stock alert.
My new alert is WTFS – Xinde Technology Company.
Based in China’s Shandong Province in the city of Weifang, Xinde Technology Company, with fiscal 2010 revenues of $123 million, competes in three primary product segments, namely (1) fuel injection system products, (2) diesel engine products and (3) generator products. The Company has a broad range of products including non-vehicle diesel engines, diesel generators, injection pumps, injectors and three-coupling components, agricultural machinery and construction machinery which greatly reduces its comprehensive costs which, in turn, increases its competitiveness. The Company’s focus is on the domestic market in China, where its customers include several of China’s largest companies in the country’s most rapidly growing industries. As a consequence, the Company’s production volume has been growing approximately 30% annually.
WTFS – Xinde Technology is a smaller Chinese version of something like a Caterpillar or John Deere. Just like those companies, WTFS has been beaten down and now looks to be an unbelievable value.
Value stock pickers like to see low P/E ratios, and it’s hard to find a profitable company whose stock trades at a P/E ratio of 1. But that’s what we have in WTFS! 1.12 to be precise.
This stock offers an example of a company getting beat up for the sins of its peer group, and the smart money seems to be establishing positions now that the stock is on sale.
Caterpillar (CAT) trades at 13x P/E ratio! John Deere (DE) over 11x P/E ratio!
Those companies are also HUGE ($30-50 Billion market valuation) and have likely already reached their peak of growth, meaning they should probably be trading at a LOWER P/E than WTFS, which is only a small fraction of their size and focused on the powerful growth empire of China.
Xinde Technology makes fuel injected and diesel engines, along with related products like generators and farm equipment that use the engines. There’s a big market for these products in China. Sales of diesel engines alone are estimated to total $100 billion per year.
Even though the internal combustion engine has been around for more than a hundred years, there are still opportunities to increase their efficiency and make them more environmentally friendly by decreasing their green house gas emissions, and WTFS is researching and delivering in both categories.
The company’s CEO says that “Technology is at the heart of our success.” WTFS is all about being high-tech and making money from their rapid innovations. The company’s flagship product, the R series engines, is an example of this.
Originally designed for use in farm equipment, advances in fuel injection technology have allowed the company to sell the engines for a variety of other uses including highway construction and mining. This innovation is already leading to increased profits, now available because WTFS opened up new doors with their new technology.
Greener engines are also needed in China, a country facing a mega-dose of the increased pollution that comes with a growing economy. Some of Xinde’s generators already meet European emissions standards…and more environmentally friendly products are on the way.
WTFS is proving to be a leader in making green engines and generators. Production capacity is growing by 30% a year to keep up with demand and the company can now deliver more than 20,000 engines a year.
Green technology should deliver an important sales boost, but one of the biggest growth opportunities for WTFS is in its rice transplanters, a piece of farm machinery that automates the planting of rice. Labor is dramatically reduced by 70% and yields are increased by about 50% with this technology.
Farmer’s can make a lot more money by using Xinde’s product!
Inflation is an even bigger problem than pollution in China and the central bank is trying to get it under control. Food prices are the greatest concern. They’re growing at more than 11% a year, and the government is encouraging farmers to increase productivity with state-of-the-art equipment. Subsidies on rice transplanters and other farm equipment reduce the cost of equipment to farmers by about 50%. WTFS sells the farm machinery at full price, or higher, and the government subsidy boosts their revenue.
WTFS already has a strong presence on Chinese farms with its low cost, high efficiency generators, so farmers are likely comfortable buying rice transplanters from a trusted name brand like Xinde.
WTFS is a profitable company with a history of making money. Revenue totaled $123 million in its last full fiscal year and profits topped $19 million, or $0.09 a share which is very close to the recent stock price.
The financial performance is strong, and the P/E ratio is ridiculously low. This may partly be due to a recent scandal, that may have just created an amazing opportunity for us.
Chinese stocks were hit hard when short sellers issued reports questioning their accounting standards. As we see so often in the stock market, selling was indiscriminate and US-listed shares of nearly every China-based company were driven lower as investors rushed for the exits. Many of the stocks were driven to absurdly low valuations, and WTFS sits in that group.
How rare is it that we even have an alert with strong revenues and a low P/E ratio? Virtually never! Because of this, I did some extra digging into the filings of WTFS.
The accounting looks sound. There are no intangible assets on the books since the company makes real things in real factories. The value of intangibles, things like patents or untapped oil reserves, is usually reported as an estimate prepared by company management. Sometimes the estimates are little more than inflated guesses, and overvaluation of intangibles was cited as a concern by some short sellers. It’s a legitimate concern since that same problem was at the core of the Enron and sub-prime, um…situations.
But short sellers make money when stocks go down, so their motives for releasing the reports might be questionable in this case. Investors, as usual, decided to sell first and ask questions later.
Digging deeper into the books of Xinde, none of the usual red flags for accounting problems are showing up — cash flow from operations is positive, inventory and accounts receivable are growing in line with sales, and the company has no long term debt that I can see. These are frequently areas that accountants and analysts analyze to figure out how healthy a company is, but in the panic selling that took place recently, no one seemed to take time to read the financial statements. It now looks like the price plunge in WTFS was an example of throwing the baby out with the bath water. The company makes real products and real money.
Now let’s get to the delectable chart…
The chart shows the damage from the recent overall Chinese sell-off. WTFS is sitting near its 52-week low. The stock has formed a seven week base, and momentum is positive.
Since WTFS has been consolidating for 7 whole weeks, it appears as though it’s really at the base of the chart. While typical OTC volatility can occur, it looks like overall WTFS isn’t going much lower. It’s already at an insane 1x P/E ratio. Momentum in WTFS showed a bullish divergence as the entire stock market sold off, indicating WTFS is stronger than the rest of the market.
Trading activity in WTFS during the recent market sell off was below average, a sign that the panic selling may be over. In fact, the money flow index, an indicator designed to detect what the smart money is doing, shows signs that WTFS is under accumulation.
Traders are getting in now, while WTFS is still at the base of the chart. They are buying now because once this stock starts moving, there is no upside resistance until WTFS hits about 22 cents. That’s a gain of almost 100% from the current price.
Even the resistance at 22 cents is pretty minor. The real heavy resistance isn’t until the high 70’s, which is well over a 500% gain away!
Hitting the high 70’s still puts WTFS at a P/E ratio of about HALF of Caterpillar’s!
Listen, the truth is I don’t pretend to be some fundamental valuation analyst. OTC and Pink Sheet companies typically move based on one thing, hype. Now that’s something I know a thing or two about. The market discovers an unknown or little-known company that is thinly traded and has a low price. A surge of buying coming into a stock that’s thinly traded can cause extremely powerful gains. The stock, hopefully, skyrockets for a while. Sooner or later it likely comes crashing back down to earth. Get in early, get out early. It’s not rocket science.
What I do know is P/E bargains in the OTC world don’t come along often. We’re talking about a company with what I believe has far more growth potential than Caterpillar, trading for a P/E of 1.12. CAT is trading at 13.23x P/E! WTFS has a market valuation that’s $28.3 Million and CAT’s is $51.6 Billion. Logically WTFS should be trading at an even higher P/E ratio than Caterpillar since they have so much more room to grow.
Here is the hidden secret about WTFS, they CAN trade at the exact same P/E CAT is trading for right now!
WTFS 52 week high is $1.40. If WTFS were to trade at CAT’s P/E ratio…they would be trading at $1.39!! 1 cent from the 52 week high.
WTFS has shown they can get there. We’re talking about a huge revenue stock with an upside of well over 1000%!
While WTFS has the potential on a fundamental level to reach the illustrious “ten bagger” status, you should use EXTREME caution with this one. Looking at the chart you can see WTFS has been beaten down before. It appears as though we are much nearer to the bottom of the chart than the top, and we can only go up from here. However, that’s never true. As good and safe as a P/E ratio of about 1 is, anything can happen and WTFS is volatile. Use extra caution and a very tight stop. Watch for upward momentum, beware of gaps, book profits quickly, etc, etc.
I’ve been watching WTFS waiting for it to appear to be breaking out of the current consolidation range. When I saw it make a gain during the awful day last Friday, my hopes were up and then when this
stock pick clocked in another substantial gain today on triple yesterday’s volume…I figured now could be the right time to unleash this value beast.
If the market recovers, a rising tide lifts all boats and Xinde could soar as the low P/E gets picked up on value investors radars. If the market continues lower, investors trying to minimize risk will spot a stock selling near the value of its earnings, which could still cause WTFS to rise by a large amount even during very rough times.
WTFS is a rare play! We’ve got a P/E ratio of about 1, less than a TENTH the P/E of their much larger competitors. The value is off the charts, and the chart is also off the charts, if that’s possible. WTFS is floating around at the base, just a few cents from the 52 week low, with a 52 week high that represents a 1086% gain from the current price! Momentum is increasing and the chart looks to be heating up. Use caution on this volatile play, but WTFS possesses an upside that we don’t encounter everyday.
WTFS could get real hot for us. Put it on the top of your radar for manana!
PSA – Penny Psycho
Don’t ever invest based on what I say, do your own research and consult with a licensed professional before investing, only invest what you are prepared to lose. Any statements and opinions given are amateur and biased and should be treated as such. Past performance does not indicate future performance in any way. Check the latest SEC filings before investing, and research other information on the risks of investing in low priced companies at www.sec.gov
READ IMPORTANT DISCLAIMER
Disclaimer – This newsletter is owned, operated and edited by IPR Agency LLC, a California Limited Liability Company. Any reference to “we” or “our” refers to IPR Agency LLC. By reading our newsletter and our website you agree to the terms of our disclaimer, which are subject to change at any time. We are not registered or licensed in any jurisdiction whatsoever to provide investing advice or anything of an advisory nature. Always do your own research and consult with an licensed investment professional before investing. Companies with low price per share are speculative and carry a high degree of risk, so only invest what you can afford to lose. By using our service you agree not to hold our site, its editor’s, owners, or staff liable for any damages, financial or otherwise, that may occur due to any action you may take based on the information contained within our newsletters or on our website. We do not advise any reader take any specific action. Losses can be larger than expected if the company experiences any problems with liquidity or wide spreads. Our website and newsletter are for entertainment purposes only. Never invest purely based on our alerts. Gains mentioned in our newsletter and on our website may be based on EOD or intraday data. This publication and their owners and affiliates may hold positions in the securities mentioned in our alerts, which we may sell at any time without notice to our subscribers, which may have a negative impact on share prices. We have been compensated up to thirty thousand dollars to conduct two days of investor relations marketing for LSTG by a third party, Winning Media, which has expired We have been compensated thirty thousand dollars to conduct two days of investor relations marketing for WTFS by a third party, Research Driven Investor LLC. All of this compensation, expired or not, is a major conflict of interest in our ability to be unbiased. Therefore, this newsletter should be viewed as a commercial advertisement only. The third parties, company, or their affiliates may wish to liquidate shares at or near the time you receive this email, which has the potential to hurt share prices. We never own a position in the companies discussed in our communications, email or otherwise, unless otherwise stated in this disclaimer. Our emails may contain forword looking statements, which are not guaranteed to materialize due to a variety of factors. We do not guarantee the timeliness, accuracy, or completeness of the information on our site or in our newsletters. The information in our email newsletters and on our website is believed to be accurate and correct, but has not been independently verified and is not guaranteed to be correct. The information in our disclaimers is subject to change at any time without notice. See full disclaimer at pennystockalerts.com/disclaimer
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