Top 5 Buys for a Comeback

Robert Hsu, June 09, 2009

In this Issue:

Big Payday for Small-Cap Stocks

My recent trip to China confirmed everything my research was telling about small-cap stocks. The right companies, in growing sectors such as education, agriculture and food consumptions, spell nothing but profits for investors.

So, how do I go about identifying these hidden gems? I look at the numbers, and if the numbers look good, then I talk to my network of lawyers, venture capitalists, service providers, professional investors and hedge fund managers who focus on small-cap Chinese stocks. Most of the time, my friends in this circle know the senior management of these Chinese companies quite well. So I ask them what they think of the CEO and CFO, and whether or not they can be trusted.

Because smaller companies can sometimes run the risk of having dishonest management and financial manipulation, I like to personally meet or speak with the management teams to get a better perspective on what is happening within the organization.

And my last trip to China gave me just that opportunity. After speaking with the management executives at the companies I've been watching, I narrowed my list down to three companies that I put through my small-cap stock filter to see if they were worth recommending. And boy were they!

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