July 13, 2011 at 23:52 PM EDT
I See Questionable Drivers Behind 2 Big Chinese Stock Advances – Nasdaq: VALV and Nasdaq: KGJI
The most active stocks list Wednesday was volatile, with winners rising from 10% to 39% and decliners dropping from 9% to 42%. Chinese stocks led the list, you would think as the likely beneficiaries of favorably interpreted Chinese economic data, which was released Wednesday. However, my view of the real reasons behind two of the risers exposes what I believe are questionable drivers. So I say buyer beware.

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Relative tickers included: Nasdaq: VALV, NYSE: KKD, NYSE: ETE, NYSE: FF, Nasdaq: KIOR, Nasdaq: KGJI, Nasdaq: PBTH, Nasdaq: NEWN, Nasdaq: TAOM, AMEX: PAL, AMEX: BMJ, Nasdaq: SORL, Nasdaq: ALRN, Nasdaq: PPHM, Nasdaq: DYNT, Nasdaq: AFFM, AMEX: ALN, Nasdaq: CLNE, Nasdaq: BWOW, Nasdaq: SCMF, NYSE: GU, Nasdaq: SNFCA, Nasdaq: MDGN, Nasdaq: LBIX, NYSEArca: AGQ, Nasdaq: SPEX, Nasdaq: CHCI, Nasdaq: RGDX, Nasdaq: TSPT, Nasdaq: FPFC, Nasdaq: BKOR, Nasdaq: CRVP, NYSE: ITG, Nasdaq: TBSI, Nasdaq: LIME, Nasdaq: VTUS, Nasdaq: TOPSD, Nasdaq: BCAR, NYSEArca: ZSL, Nasdaq: BOVA, Nasdaq: OLCB, NYSE: OWW, Nasdaq: ADTN, AMEX: WGA, Nasdaq: PWAV, Nasdaq: AMTC, Nasdaq: CPSS, Nasdaq: CDTI, NYSE: TRU, NYSE: VR, Nasdaq: EONC, Nasdaq: BMTI, Nasdaq: ALTI, NYSE: YUM, NYSE: MAR, Nasdaq: ARTW, Nasdaq: OZRK, Nasdaq: ESBK, Nasdaq: EMMS, Nasdaq: FEIM, Nasdaq: FTLK, NYSE: GKK, Nasdaq: GFED, Nasdaq: IGTE, Nasdaq: LLEN, Nasdaq: MSW, Nasdaq: MFRI, Nasdaq: FIZZ, AMEX: UWN, Nasdaq: NFEC, Nasdaq: NTIC, Nasdaq: SLP, Nasdaq: UFPI, Nasdaq: WBNK, Nasdaq: WINA.

I See Questionable Drivers Behind 2 Big Chinese Stock Advances – Nasdaq: VALV

Shengkai Innovations

Wednesday’s most active risers was led by penny stock Shengkai Innovations Inc. (Nasdaq: VALV), which increased 39.5% on the day. Shengkai was mentioned in a China Analyst article as a leader among Chinese stocks in terms of ROE, with a reported 134.64% return over 12 months. The company was also noted to have a net profit margin of 69.42% over the same span. The wire was otherwise absent of reasoning for the rise in the stock. VALV makes ceramic valves, which it exports to the Asia-Pacific region, North America and Europe. Yahoo Finance has the float for this $58 million market capitalization stock at 8.0 million shares, so moving it was not so difficult. The listed P/E ratio on the stock is extremely low based on Yahoo data. However, we’re dealing with a small Chinese company here, so there are many unknowns about the industry, company and the opportunity. I would have been more interested in the stock and its move if the reason behind it were other than a PRish article.

Kingold Jewelry

Kingold Jewelry (Nasdaq: KGJI), another penny stock from China, benefited from a Street.com article listing it as 1 of 5 stocks insiders were snapping up. The article included Krispy Kreme Doughnuts (NYSE: KKD), Energy Transfer Equity (NYSE: ETE), FutureFuel (NYSE: FF), KiOR (Nasdaq: KIOR) and Kingold Jewelry (Nasdaq: KGJI). This stock is down significantly since last summer, and there must be a good reason for that wouldn’t you think? KGJI is off its high by 83% even after Wednesday’s 25% spurt higher. The founder of the company and its chairman may be a good guy who believes wholly in his company, and the stock does trade at a trailing P/E ratio of 4.7, which under normal conditions would seem cheap for a stock that sells into the expanding Chinese middle class.

But here’s the problem... Kingold sells gold jewelry, and as gold prices rise, its margins get squeezed and sales opportunities get limited. That’s why the stock is down over the last year in my view, and I think it’s a good reason. I would, however, look at this stock should gold prices indicate a longer term turn in trend lower. However, while I see gold backtracking off whatever high it sets Thursday, I don’t see it backing down far enough for jewelry retailers to become attractive long-term.

The remainder of the day’s upside list included: PROLOR Biotech (Nasdaq: PBTH), New Energy Systems (Nasdaq: NEWN), Taomee Holdings (Nasdaq: TAOM), North American Palladium (AMEX: PAL), Birks & Mayors (AMEX: BMJ), SORL Auto Parts (Nasdaq: SORL), American Learning (Nasdaq: ALRN), Peregrine Pharmaceuticals (Nasdaq: PPHM), Dynatronics (Nasdaq: DYNT), Affirmative Insurance (Nasdaq: AFFM), American Lorain (AMEX: ALN), Clean Energy Fuels (Nasdaq: CLNE), Wowjoint Holdings (Nasdaq: BWOW), Southern Community Financial (Nasdaq: SCMF), Gushan Environmental Energy (NYSE: GU), Security National Financial (Nasdaq: SNFCA), Medgenics (Nasdaq: MDGN), Leading Brands (Nasdaq: LBIX), ProShares Ultra Silver (NYSEArca: AGQ), Spherix (Nasdaq: SPEX), Comstock Homebuilding (Nasdaq: CHCI) and Response Genetics (Nasdaq: RGDX).

The leading losers list included: Transcept Pharmaceuticals (Nasdaq: TSPT), First Place Financial (Nasdaq: FPFC), Oak Ridge Financial (Nasdaq: BKOR), Crystal Rock (Nasdaq: CRVP), Investment Technology (NYSE: ITG), TBS International (Nasdaq: TBSI), Lime Energy (Nasdaq: LIME), Ventrus Biosciences (Nasdaq: VTUS), TOP Ships (Nasdaq: TOPSD), Bank of the Carolinas (Nasdaq: BCAR), ProShares Ultra Short Silver (NYSEArca: ZSL), Bank of Virginia (Nasdaq: BOVA), Ohio Legacy (Nasdaq: OLCB), Orbitz Worldwide (NYSE: OWW), ADTRAN (Nasdaq: ADTN), Wells-Gardner Electronics (AMEX: WGA), Powerwave Technologies (Nasdaq: PWAV), Ameritrans Capital (Nasdaq: AMTC), Consumer Portfolio Services (Nasdaq: CPSS), Clean Diesel Technologies (Nasdaq: CDTI), Torch Energy Royalty (NYSE: TRU), Validus Holdings (NYSE: VR), eOn Communications (Nasdaq: EONC), BioMimetic Therapeutics (Nasdaq: BMTI) and Altair Nanotechnologies (Nasdaq: ALTI).

The day’s earnings list included: Yum! Brands (NYSE: YUM), Marriott International (NYSE: MAR), ADTRAN (Nasdaq: ADTN), Art’s Way Manufacturing (Nasdaq: ARTW), Bank of the Ozarks (Nasdaq: OZRK), Elmira Savings Bank (Nasdaq: ESBK), Emmis Communications (Nasdaq: EMMS), Frequency Electronics (Nasdaq: FEIM), Funtalk China (Nasdaq: FTLK), Gramercy Capital (NYSE: GKK), Guaranty Federal Bancshares (Nasdaq: GFED), iGate (Nasdaq: IGTE), L&L Energy (Nasdaq: LLEN), Mission West Properties (Nasdaq: MSW), MFRI (Nasdaq: MFRI), National Beverage (Nasdaq: FIZZ), Nevada Gold & Casinos (AMEX: UWN), NF Energy (Nasdaq: NFEC), Northern Technologies International (Nasdaq: NTIC), Simulations Plus (Nasdaq: SLP), Universal Forest Products (Nasdaq: UFPI), Waccamaw Bankshares (Nasdaq: WBNK) and Winmark (Nasdaq: WINA).

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