Last Thursday, August 12, a person by the name of Chimin Sang wrote an article published by the Seeking Alpha blog whom at least as of that writing indicated was short the stock..You can see it if you go to YahooFinance and enter ONP in the ticker symbol and it’s in the Headlines for August 12,2010…But I will show at the very inception of his article (this in the part 1 issues raised in the filings to the SEC)..Read his first issue about ONP possibly being fraudulent below in brackets and below it I will show you something that at least as far as I can that Mr Sang is not revealing that G & A isn’t the only expenses of a company’s revenue…This about on the negative G & A 4Q of ($327,064)…They did an amendment on the 10K for 2008 for the General and Administrative Expenses for 2008..Excerpt From Chimin Sang On Seeking Alpha article titled–Orient Paper:Inconsistent Record Keeping Raises Red Flags inside brackets:

[[[[[ 1. Inconsistent G&A Spending

Compared to its reported revenue, Orient Paper’s G&A spending is disproportionally low. In 2008, only $327k was spent on revenue of $65ma, which amounted to 0.5%. If you think this number is odd enough, then the Q4 G&A number is even odder. If you look up their quarterly reports for 2008, the first three quarters show the G&A cost at $221kb, $203kc, and $231kd respectively, which leaves the fourth quarter G&A cost a negative $327k. There is no explanation in the 10-K for this abnormality.
FY 2008
G&A $327,825

4Q
G&A ($327,064)

3Q
G&A $231,116

2Q
G&A $202,816

1Q
G&A $220,957

a. 2008 10-K, Page F-4

b. 2008 Q1 10-Q, Page F-3

c. 2008 Q2 10-Q, Page F-3

d. 2008 Q3 10-Q, Page F-3 ]]]]] End

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My belief is that G&A is just a small part of their expenses..G and A is general and administrative expenses..Any well bred stock analysis knows a company doesn’t have to file a 10 Q for the 4th quarter –just has to file a 10 Q for the first 3 quarters..They had to file an amendment of the 10K which showed the General and Administrative Expenses for the year at $327,825 for 2008..Here is the reason why the expenses are not high particularly the General Administrative Expenses…Chinese companies are different in a lot of industries and some have few expenses for R & D..Below is some responses to possible shorts or even longs on the stock as far as the low expenses of G & A Expenses if such questions or issues were brought up:

1) How Has ONP Grown While Reducing Employees from 893 to 600?

ONP has no idea how many were short term, how many were simply part time, or what the positions were to accrue to the number. .

2) How Did ONP Grow Sales While Spending Hardly Anything on Advertising & Promotion?

I am going to say this statement..How much has some of the other other companies spent in this area? I personally had extreme difficulty in finding lot of expenses by many companies in this area as others are focuses on this “burning” issue… If I am wrong on this, please give links to show me otherwise..I just don’t see a lot of R & D Expenses by many companies…No joke aside…

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Here is their full year SGA for 2007 and 2008 (2009 had a large increase from these 2 years due to professional service fees relating to becoming a public company such as investor relations and others):

Selling, general and administrative expenses

Selling, general and administrative expenses were $327,825 for the year ended December 31, 2008, an increase of 129.1% as compared to $143,112 for the same period of 2007. This increase was due primarily to increased business travel and research expenses required to expand our production capacity and market position as well as a general salary increment made to employees, offset by realized foreign currency gains

2008 10-k:
http://secfilings.nasdaq.com/filingFrame…\2010\02\01\&CoName=ORIENT+PAPER+INC.&FormType=10-K/A&R cvdDate=2/1/2010&pdf

2009 10-k:
http://secfilings.nasdaq.com/filingFrame…\2010\03\29\&CoName=ORIENT+PAPER+INC.&FormType=10-K&Rcv dDate=3/29/2010&pdf

3) How can ONP state that advanced technology and intellectual property rights from a team of 37 R&D professionals with comprehensive R&D facilities while it is reporting to the SEC R&D incurring expenses of less than $32,000 a year for R&D and reporting no intellectual property assets?

-from 2009 10-k–See it inside my brackets:

[[[[[ Our R&D activities are carried out by a task force led by a group of 5 senior managers (in charge of product development and quality control) and joined by a group of selected engineers and technicians. The Company charged the time spent on the R&D projects (manufacturing waste discharge recycling and digital photo paper manufacturing) to R&D expenses and incurred $30,130 and $30,546 in R&D expenses for the years ended December 31, 2008 and 2009, respectively. Our R&D efforts have resulted in our capability to manufacture digital photo papers.]]]]]

(2009 10-k link is above in another statement)

-Obviously, ONP does not have a full time R & D department and are used only for specific projects and they are going to promote their R & D strongly..

Supposedly Muddy Waters was turned down late last year of asking for about $300,000 according to ONP management for a good writeup of the company and I believe like 20,000 shares or close to it was asked by one of them which one of the 2 Muddy Waters analysts has purportedly already admitted to..The shares to be given for a good writeup of the company..This author wonders if Muddy Waters would have given ONP a good writeup if ONP did offer compensation to them…This particular analyst isn’t lying about the first 3 Q’s of G & A spending..But that is only a small part of the expenses of the 65 million in revenue earned in 2008..And for any company really..A company doesn’t have just G & A expenses..How about Cost Of Sales? The apparently bear short and distort happening generated by the analysts says that is only .5% of the yearly revenue..But he fails to include the Cost of Sales in any of the first 3 Quarters in the SEC filings..For the 3rd quarter of 2008, the Cost Of Goods Sold is $14,731,309…The 10 Q for 2008 in the 3rd Quarter is $231,116 in G & A spending, but the analysts omitted the Cost of Sales–yeah, it would be only .5% of revenue probable without including the Cost Of Sales…Unbelievable….Many companies have low r & D costs..Does that mean all of them are probable frauds ? I stopped reading after that 1 Issue..

Once so many bashed maliciously a company like ONP and distorted the truth about a company IMO, the real truths at least IMO based on their sources that are now coming out will rocket such a stock ..Some are running but not the company..The very ones that seem to be running as far as coverage of the stock is Muddy Waters..The issue of fraud by the company is remote IMO..Yes there could be small mistakes in accounting but my belief is if so,those minor errors in the books will be minor and wont hurt the stock in the long term at these very depressed below 5 P/E levels…IMO the stock will rocket–you don’t audit yourself if you are a fraud and the only thing keeping it from a double digit share price is to show these statements were all “smoking guns” to manipulate the stock to the downside…

Mike Marsh who is the author of Part One and Part Two currently has a Long Position In ONP but brother Rob Marsh currently doesn’t have a position in ONP…..We believe that the research on several statements on Part One and Part Two is true to the best of our knowledge..Do your own independent research before you make an investment purchase..See our disclaimer.
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The ONP short and distort tactics (at least in my opinion) generated by 2 unknown analysts (Muddy Waters) is coming to an end…Well, they are not unknown now for many..I did my due diligence myself during this whole saga..I uncovered one such recent tactic that happened last Thursday in Part Two of this article in another page…I will get into that later in this article..And please read it..It is very telling in this Saga..There are many more inconsistencies too that have already been addressed both thoroughly including documents by ONP that I don’t have time to get into all this saga since Muddy Waters made statements at the end of June on ONP being a fraud and a $1.00 stock..Especially since audited Earnings for the company on the 2nd Quarter happened Monday–August 16th and confirmed their stellar preliminary results….Actually on August 6th, Muddy Waters on their website stated they were dropping any further coverage on the stock and going else where barring any unforeseen events and letting others who are analyzing the stock continue..And they stated since an Audit Company was checking it, they stated they were moving on..What reputable company would just do that, especially during some of the company’s more telling times of audited earnings coming up and hopefully soon the truth about whether the company is a fraud or not..During their statements, they would make a disclaimer on a crazy sounding disclaimer statement as if what they were saying may not be true and to treat their statements as is or some such silliness..I am trying to be nice..ONP was their first inaugural analysis of any such stock in which they raised several statements –one is that ONP overstated revenue by 27 times the actual amount in 2008..However, ONP stated it was the wrong company which ended up at least according to ONP another Paper company with a similar English name and not theirs and that company was a much tinier company —with indeed I believe the tiny revenue Muddy Waters was stating..Lets look at the 27 times overstatements of revenue insight..Below inside brackets is an excerpt of a press release by ONP on July 6,2010:

[[[[[ Muddy Waters points to a "smoking gun" that they claim proves Orient Paper "overstated its 2008 revenue by 27 times." Their report claims that the "smoking gun" is that the audited 2008 PRC financial statements for a "He Bei Oriental Paper Co. Ltd.", which they claim is Orient Paper's China operating subsidiary, shows revenue of only RMB 16.3 million or approximately $2.4 million vs. the $65.2 million that Orient Paper claims HBOP generated in its SEC filings. Orient Paper previously pointed out that the translated English name of the entity for which 2008 financial statements were obtained by Muddy Waters did not match with the English name of HBOP. Subsequently, Muddy Waters claimed that despite the error in their translation, they have studied other corporate information of the entity they identified as being Orient Paper's China operating subsidiary and they continue to believe that this "entity" is indeed HBOP.

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Orient Paper has no knowledge about how and where Muddy Waters obtained their reports, which allegedly carry the "personal seal" of the Company's Chairman and Chief Executive Officer, Mr. Zhenyong Liu. In fact, all of HBOP's statutory audited financial statements are marked by HBOP's corporate seal, and never the personal seal of any natural person and most certainly never the personal seal of Mr. Liu. ]]]]]

Also the company confirmed that they have in excess of 25 million in cash from the latest offering..About 5 million was paid as a deposit on the new Manufacturing Machinery for new Business Ventures..About $ 5 million was paid as an initial down payment on the new machine for the Paper Business…Milestone payments would be for the rest..What fraud company would get the bank to confirm the cash balance??Hmmm…Below is confirmation as testified by a confirmation of bank account balance (entitled “Certificate of Creditworthiness” by the Industrial and Commercial Bank of China), which the Company is providing to the public via the following website..See this in brackets below:

As of 7/2/10

[[[[[ On June 11, 2010, Orient Paper transferred $25 million of the net proceeds that the Company received from the April 2010 financing to its wholly owned subsidiary "Baoding Shengde Paper Limited" ("Baoding Shengde"). Under the Company's current legal structure, Baoding Shengde is the operating entity which will own the title to new business assets and conduct the operations for the new business ventures of Orient Paper. On March 15, 2010, which was prior to the April 6, 2010, closing of the financing, Hebei Baoding Orient Paper Milling Co. Ltd. ("HBOP") made a $5.6 million security deposit to Henan Qinyang on behalf of Baoding Shengde to purchase the machinery. As of July 2, 2010, the only use of the financing proceeds is a net $4 million repayment of the March 15, 2010, HBOP new equipment advance. As of July 2, 2010, Baoding Shengde has a cash balance of RMB 142,837,284.23 (approximately $21 million) in its corporate bank account, as testified by a confirmation of bank account balance (entitled "Certificate of Creditworthiness" by the Industrial and Commercial Bank of China), which the Company is providing to the public via the following website

http://www.prnasia.com/sa/2010/07/06/201...

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. The translation of this certificate is available at the following weblink:

http://www.prnasia.com/sa/2010/07/06/201...

The rest of the net proceeds remain in the Company's U.S. bank account at JP Morgan Chase Bank to cover the regular ongoing operating expenses of the U.S. legal entity of Orient Paper. The $21 million cash held at the Industrial and Commercial Bank of China will be used to fund Baoding Shengde's future payment obligations under the installment payment schedule, commensurate with the progress made on equipment installation by Henan Qinyang.

From 8k

http://www.sec.gov/Archives/edgar/data/1... ]]]]]]]

Muddy Waters stated they believed they had the right company after they heard from ONP stated Muddy Waters identified the wrong company with a very similar English translation name…These statements among too many others that I don’t have time to get into all of them (some by others in what I believe to be manipulating the stock) tanked the stock..I did my due diligence myself during this whole saga..I uncovered one such recent tactic that happened this past Thursday..This will be in Part 2 of my article on this subject…There are many more inconsistencies that have already been addressed both thoroughly including documents by the company and others that I am not going to reharp through all of them.. Before you read further in Part 2 of my article on this, read the comments in parenthesis next..This is to update anyone who doesn’t know what is going on in this saga..Read parenthesis for anyone that doesn’t know any of the Saga going on recently with ONP…

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(ONP now has retained an audit firm Loeb and Loeb LLP that plans to work with the Company’s Audit committee to obtain a Big Four audit firm..This was first announced on July 16,2010..They planned to obtain a Big Four audit firm to conduct an independent investigation into the issues raised by Muddy Waters,LLC.. Since then (13 days later), the company announced the preliminary results of the 2nd Quarter unaudited Earnings..They were stellar ..And I doubt they would have announced the preliminary unaudited earnings with Loeb and Loeb retained 13 days earlier if the company’s management knowingly committed fraud or cooked the books..This preliminary announcement was July 29th..Just this Monday.the audited 2nd Quarters was matching the stellar preliminary results..Back up in time, on August 3rd, Loeb & Loeb LLP had retained Deloitte & Touche Financial Advisory Services Limited (“Deloitte”) to help them..They are considered a well respected Big Four Audit Firm…Now we have what I would like to call as ambulance chasing by many other law firms getting into the action just in case ONP committed some major fraud…Some show Class Action suits for nearly 10 years on ongoing investigations but they have never been resolved..But I can understand their positioning..Without such methodology, we may never get any possible Bernie Madoff’ like scams so I understand all the filings of investigation by these law firms.. I appreciate what they do)…

See part 2– ONP-Revealing Investigation Work (May Mean Triple Digits Gains To The Upside In My Opinion)

Mike Marsh currently has a Long Position In ONP and is the author of Part One & Part Two but brother Rob Marsh currently doesn’t have a position in ONP…..Please do your own independent research before you make an investment purchase..See our disclaimer.
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Also , I just wanted to elaborate on a Myth or should I say an adage that can be sometimes erroneous. You have probably heard it…….” Buy Low and Sell High ” !! There is absolutely nothing wrong with this but many times in the past the greatest winning trades from my own account were when I “bought high and sold higher”. Some people characterize this as a Bull Flag or stair step stock pattern. But what it is is a Stock that has a lot of momentum and a lot of Volume behind it. Basically you are riding a wave which at the moment is continuing to rise and rise.

Hence the phrase “buy high sell higher “. So you are y getting a confirmation signal that a Stock is on the rise behind strong volume and when you see this you enter the trade !!

Simple as that !!

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# 6 If there is still adequate liquidity for the market..Don’t fight the tape..When liquidity looks scarce which is usually near market tops, do fight the tape..Waiting for a possible 10% more gain isn’t worth a possible pullback of 30 or more per cent..

# 7 Dont over analyze stocks..When that happens you are usually going into so much obscureness of variables,the market wouldn’t pick it up anyway to give it another direction..Usually only 4-5 variables at the most will impact a stock and most of them are easily identified in the stock with just a little study..

# 8 Do very little momentum trading if you are an individual small investor….Here’s why..The big hedge funds will bid prices up relatively fast and sell off fast making your bids and sells pushed much higher and many times not receiving your orders and having to place them much higher on the bids and lower on the sells..Sometimes it becomes a crowded trade where the bulls and bears come to a head and it can go into any direction fast without much certainty..This can cause great losses..Especially when you couldnt get your bids and sells where you wanted it to be..Also there is a higher risk of a investment not being as safe as undiscovered gems..Remember that..

# 9 Have an exit strategy on your stocks…I had about a 4th investment on a stock in the fall last year..The stock already spiralled down where I bought it at 37 a share..I knew in an owners earnings with just 9% growth at its core value without growth spurts they achieve on acquisition, the stock was worth 49..I double down at 23 in March and sold eventually at 49..Don’t be a price taker if a stock has great fundamentals and is undervalued…I refused to accept 20 a share was going to last and it didn’t..

# 10 Don’t let nervousness engulf you when picking stocks..I have many times not added positions to existing stocks during market negativity and fear and when I have done this more often than not, my stocks surge more without adding to it..

Remember,although you should have a bucket of small cap stocks in my opinion as your core investments, some larger caps can be added to the core especially one with juicy year in and year out rising dividend stocks bought after great market rises ..

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Please do your own investment research before you make an investment purchase..See our disclaimer..

#1 Stocks should be approached more longer term..The best advise is to make sure the company is well-researched..Most stocks are not cheap..The market wont let it get too cheap..When you have a long horizon to a great gain..My advise is to not sell on a 50% rise to 70% rise to its intrinsic value..The best thing is to actually hold to what you think its worth..Too many people get out of a stock due to boredom or another stock that they feel has more upside potential..The one problem with this is becomes habit to not hold for longer terms..And may lead to mistakes since many stocks are not canvassed long enough for study..Best to buy and hold to a fair value..Taking profits after a great rise short term is not so bad..But only after several conviction of a strong uptrend has been reached–30% above 50 dma for example..

#2 Don’t be fanciful about bottom picking or top picking..The odds aren’t in your favor and by doing so you may miss the forest reading of a great many points to the upside of a stock that will in time obscure the 10 cent to 60 cent range of an attempted bottom pick..The biggest mistakes investors make..

# 3 Most of your stock picks should have strong revenue growth..It’s easy for a while to help the bottom line be more attractive by short term manipulation or just management decisions..But due to demand cycles like cutting work force may end up just increasing overtime in top peak seasons of the demand cycle of a company’s goods or services..Look for strong 40% growth or higher on revenues..Some companies you cant even find out where their earnings growth comes from..Without revenue,you cant expect a stock to surge ahead for long..

# 4 Over trading..You are nervous because you have too much of a position of a stock..Who knows what the nervousness is coming from..You then dont study a stock to see how its downtrending and pick a bad point in a pullback..Then because the bottom perfect picking dominates your psyche..Yor quickly sell the buy point you put in that day on the same day getting out of it..Simply because the pick was not close to being right..Had I done this yesterday to a stock I didnt have a good added position to a pullback, I would be squirming in despair..The 23 stock is up 3.57 a share..Again,the goal of an investor is to make money not picking exact bottoms or tops..

# 5 High growth stocks will be full of dilution-– selling after such is a huge mistake and selling during is a mistake too..Just take it on the chin if its one of those rare breeds where expansion looks good..This I can say for many China Agriculture stocks..Very few stocks with a lot of acquisition is healthy for stocks..Those I can say so is good for the gander..

Please do your own investment research before you make an investment purchase..See our disclaimer..

We will in a heart beat point out analysts we feel are very noteworthy..One such analyst is Richard E. Band..To show how stellar his returns for investors is that his recommendations since 1984 have brought 1100% returns…He focuses on stocks such as we do here at Madstockpicks.com ..Small -to Mid-Cap Stocks..His stocks on a volatility level measures in the low range..I promise we dont or wont make a dime off any newsletters he has by marketing them..We just appreciate any great analysts out there and he has newsletters at InvestorPlace dot com via online or mailed to subscribers….His frequency of trading is a few stocks each month..One would have a 6 month Money Back Guarantee..It would be prorated thereafter on a $99.99 1 year subscription for first time subscribers..But let me highlight a few stocks of his recent recommendations…

History will show this monster rise in the stock market is almost near the flattening out process..When such an occurrence happens, where do you turn to?..Healthy low P/E stocks with nice juicy dividends that have had consistent returns for several years on earnings…Here are some of Mr. Band’s recent recommendations:

Dividend Stock # 1 -FPL Group (FPL)
Its based in Florida and its the nation’s greatest producer of green electricity ..The electricity is based on wind and solar generating uinits..It has a healthy 3.4% dividend that Mr Band thinks will be increased within 6 months..Also it has one of the best returns in the utility field as far as earnings..Its up 11% annually for the past 5 years..

Dividend Stock # 2- Aqua America (WTR)
First, let me say as Mr. Band points out,Aqua America has a dividend sustenance of 19 increases in the past 18 years…The company has a strong balance sheet and is America’s strongest water utility and one of the most safest..Its is a very essential product,life essential as a matter of fact..Its customer base is diversified along wide-spread geographical lines..It covers 3 million people along 13 states…Management is shareholder-friendly..WE like as Mr Band does great franchise stocks with low debt and a great balance sheet.. WTR makes the grade..

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Dividend Stock # 3 Public Service Enterprise Group (PEG)
Agreat value stock for the moment as many of these stocks have been ignored the past few months in this bullish cycle..The New Jersey-based energy services utility company has a single digit P/E and a 4.3% dividend yield..They are cruising for a record 2009 operating performance and a projected good one next year but at a smaller rate than this year..The most profitable part of their business is their wholesale generating business that fluctuates with economy cycles..Never the less,I have seen such utilities companies getting the takeover sweep by other larger ones..As a matter of policy,Mr Band considers any utility company that trades at 7.5 times cash flow a considered possible takeover target..The company is at the desired metrics already..Should a asset-acquiring company takeover PEG,one can pocket as much as 25-30% gains in 1 day should that happen…

Both Rob and Mike own no shares of the above stocks as of this writing but may like to in the future..We also havent made any profits endorsing Richard E. Band’s newsletters or any subscription services at InvestorPlace dot com directly nor will not profit directly from any subscription services in the future from Richard E. Band’s subscription services or from InvestorPlace dot com..We simply have an admiration for such an analyst…Please do your own independent research before you make an investment purchase..See our disclaimer.

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Think outside the box…Goal setting…We have heard this talk all the time..I heard the first one on a radio station as being an overused term…How about thinking inside the box for once..I would like to hear that expression for once..And in that box on Saturdays during the fall season is a college or pro football game illuminating on the screen (or in the box)..What comes along with that–an infusion of a vast group of friends getting ready to see the game with beer,wine coolers and yes,wings..As an investor if you think football is a great market and has its accessories like wings–then why not buy BWLD–Buffalo Wild Wings..

BWLD reported 2nd quarter earnings higher by expectations by 5 cents at 39 cents a share..It has longer horizons by announcing on June 12,2009 that BWLD plans expansions into Mexico and Canada and other countries within the next 3 years..You got to see if it has pretty much escaped this recession or not..The answer is it has averaged 19% in revenues the past 4 years..It has even launched a Fantasy Football All-Star Blogger League–the company knows their fanatic tendencies packing their restaurants with their laptops ready to challenge online football..IBD early last month has incited investors that the stock is forming a nice cup and handle formation…It fell almost 70% last year during the tortuous tsunami in November 2008 and recaptured nearly all its losses by April 2009..The high of April 28 was furthered with a 31% pullback…The selling completely dried up when the stock hit its 40 week moving average finding support there..The cup’s right side handle started to form..What you want to see in a consolidation is a series of high volume weeks..It did this 3 times.. This is a good sign a base is forming…We have seen an upgrade around 37 and the stock is at 40…

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Now we have one undeniable fact..Check your local BWLD out in the next few Saturdays,Sundays and even Thursdays..Volume there will pick up for the casual diners.. But what I dont call this influx crowd as really casual diners at all, but raw-hide football fanatics..” Joe, you off Saturday..Well,round up the troops for the game..I got the beer covered,everyone pitch in when they get here..Dont eat before the game..We are ordering Wings..” This is a normal scene this time of year..When BWLD reports their next 2 quarters and you see earnings –dont think these group of people wont enhance those earnings..Its usually the # 1 choice of food (wings) eaten when watching football at home or restaurants…There are cheaper evaluations with the likes of MCD’s and Darden Restaurants..However at 26.52 trailing P/E, BWLD’s forward P/E at 19.3 has a PEG at .80 –well below the S&P average of 1.7…DRI has had same store comps for the year of its 3 primary concepts dropped 1.4%..But this negative figure was offset by 38 new Olive Gardens,10 Red Lobsters and 16 Longhorns..This enabled sales to grow 9%..DRI is still not a bad investment either since its trading at a forward P/E of 12..Same stores comps this year for casual dining is negative 5.6%..BWLD’S traditional wings in the last quarter as a percentage of total sales went from 22% to 20%..But their higher margins of boneless wings increased from 16% of total sales in the prior year to 19% this year…DRI quarterly revenue YOY in Q2 was 8.2% while BWLD is still gangbuster going at 32.4%..Think about that difference and projection of 40 % more BWLD’S stores by 2013 as to the higher P/E..DRI can still do a better job at controlling costs since its diverse and can increase prices of their higher demand food products and level down inventory of its lesser ones..Its diversity helps in the way that an investor shouldnt get bogged down with a casual dining and fast food stock like DRI that suddenly becomes unfavorable to the patrons as many people flock to ‘the next best thing’..But BWLD has a growing base and a ‘football face’ to it still..About 600 stores and expects 1,000 by 2013–still a growing company…Cost of labor should be lower than last year in Q3 unless natural gas prices rise substantially…Q2 showed restaurant operating expenses reduced 50 basis points at 15.3% to revenue sales due to lower natural gas expenses..Couple this with people enjoying wings 2-3 days a week through early December should boost BWLD sales..

Jesup and Lamont has a buy rating with target price of 49.. One year estimate of EPS for 2009 is 1.70..This could be an easy 19% gain for investors after the next 2 quarters..Something to think about during a slight nervous market for bulls and bears…

Neither Mike Marsh nor his brother Rob Marsh currently own shares of BWLD,MCD and DRI as of this writing ..Please do your own independent research before you make an investment purchase..See our disclaimer.

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Many times we look into that quick profit..That quick trade.. At least since many message board data centers on how a stock will trade in the short term confirms this behavior…We get caught on looking too close at the tree many times when if one will take their eye off those first few trees that loom in front of their eyes, there’s a huge forest in size on many equities….Look at RINO, CAGC.OB & CPQQ.OB for example-very small cap China Stocks…..Let’s start with RINO,,,With a market cap of 338 million and revenue of 100 million during the 2nd half of 2009, the stock at 13.50 is trading at a P/E of 7.10…The conservative estimate of EPS at 97 cents for the 2nd half of 2009, the 89 cents for the first 6 months of 2009 is only part of the forest to size up…These estimates include outsourcing to get installation of their waste treatment products that the government has already announced they are backing as the # 1 leader in the Steel sector desulpher equipment and a new capacity coming in 2010 as well…Plus oil sludge product revenue’s will come in later this year..This is a real under promise and over deliver picture in my opinion the company is forecasting…

The $1.87 in net income confirming valuations at 13.50 a share (its current price) makes a conservative trailing P/E of 7.1..But reading the forest –its highly probable with added products like the oil sludge products–2010 looks like 4 to 5 times P/E at this current price and current market cap of 338 million..There is a potential estimate based on many variable measures that I have heard from an institutional company but its only a projection –so dont count on it as solid ..That institutional investment company thinks that this company at 338 million market cap could grow one day to a 15 (US) billion dollar company ..This is not 100% confirmed by my sources conclusively yet as we are still in process of getting in touch with RINO’s new CFO Jenny Liu ourselves on such a lofty projection. …But a well-renowned institutional company who has had many interviews with the company’s directors and been in the plant thinks its a possibility ..I will say this myself–most investor’s get it wrong in our opinion where they think RINO’S revenue from desulferization systems and accessories will dry up next year since they make up to 75% in current revenues..This is a very wrong perception and couldnt be further from the truth..RINO has massive repeat revenue sources surrounding their desulferization business…The other important reading of a giant forest is RINO’s sludge treatment equipment slated for commercial use in the next couple of months that will make revenues massive to its already giant revenues…An average P/E of 15 and the stock could be traded as double-higher,a conservative figure of 27.90 can be ascertained..When outsourcing stops and the oil sludge begins,then a higher price PPS than 27.90 can be expected as institutions are chop-licking on this..This stock will trade up for the future and not on that mistep 2nd quarter due to outsourcing that caused cost of capital to rise that quarter…RINO in our opinion is the real deal…

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Next,we focus on CAGC.OB..China Agritech..It is trading as of this writing after hours on 8/27/09 at 2.89 a share..They have already a 150,000 metric ton fertilizer capacity of organic fertilizer that increased revenues by 56.9% in the 2nd quarter over the 2008 2nd quarter almost all of it due to the new production facilities at Anhui province in eastern China and Harbin in northern China that started operations in the 2nd quarter of 2009….The third production facility should be completed by the end of 2009…The Chinese government projected that raw material prices are gradually declining…This should bring in higher profits on its anticipated revenues in the future..They have no long term debt and 66.5 million in net working capital and accounts receivables at 43.7 million and cash is 16.5 million..The company has announced they are staying on top of operating cash flows..The first 6 months of this year generated over 8 million in positive operating cash flow as opposed to a negative figure in the first 6 months of 2008..They have implemented a penalty policy to their sales staff with collection responsibility,contraction of new accounts receivables to 6 months instead of 12 months,more strict credit check passing criteria as well…They established these new collection policies in the first quarter & started implementing them in the 2nd quarter..They expect to produce good results in the 4th quarter and 2010 from account receivables management program..Their bad debt decreased by .5% in the 2nd quarter when they just implemented these new policies..They can focus on the extending their operating cash flows to the now established good paying customers…They plan to come out with more higher margin products in the future to balance the mix of low margin organic fertilizer…The company is projecting 20,000 metric tons of organic fertilizers in the 3rd quarter of 2009..They have full confidence of exceeded net revenue for the year of approximately 60 million & net revenue attributable to common shareholders of 9.5 million will be exceeded…Here’s how I look at it–150,000 metric tons with government backing in a land that is scarce for farming over population demands cause a great rise in share price if this company manages receivables and delivers more higher margin products which they have indicated on doing both..Expect a PPS rise that should comfort existing and near future shareholders future income appreciation from the stock in my opinion & maybe within 6 months,a delivery to AMEX listing…

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Last a power company in China….CPQQ.OB..China Power Equipment Inc..This company fits right on in with the government’s demand for clean energy and saving of energy..They have a patented and proprietary technology of producing energy saving transformers and transformers cores..They have 55 different models of transformers in 4 product series in China..This centers around transferring an electrical energy from one circuit to another by use of inductively coupled inductors or the transformers coils..Net revenues for the first 6 months in 2009 rose 88% over the 6 months of the first 6 months of 2008..Net income nearly doubled from .06 a share to .11 cents a share..Net income for the 2nd quarter was 1.3 million, .09 cents as compared to 310,746 or .02 per share for 2nd quarter in 2008..The company expects to grow on the strong foundation of government agencies and regional utilities as they continue to expand China’s power grid infrastructure…I have high expectation for massive returns on this company in my opinion…

So after looking at such companies..I ask you this: Are you a tree reader or a forest reader?..Trying to guess Wall Street’s psychology of the short term trading swings only to possibly get tripped up in that guesswork and constantly looking at the streamer impeding other possibilities of income? Or are you a forest reader?..Seeing that a more predictable future of a possible great forest that sometimes is forgotten by the traders that keep watching too close at the trees at the edge of the forest instead of seeing data that can tell you possibly this is a great forest that is undervalued…Go ahead, try to look at the trading activity like the direction of ants migrating up and down and sideways on one or two trees..Then realize sometimes you watched the trees too closely forgetting about the whole forest…

Both Mike Marsh and his brother Rob Marsh currently own shares of CAGC.OB as of this writing.. Mike also cur
rently owns shares of CPQQ.OB and RINO as well……Please do your own independent research before you make an investment purchase..See our disclaimer.

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By Mike Marsh

Based on Warren Buffet, one should not over analyze things. In his experience of observing stocks and in his own investment experiences,usually 3-4 variables at the max count and that is about it. Everything else is Wall Street noise per Marty Whitman.If the figures look right and the company’s management knows how to run the company for the benefit of its shareholders, a 60 page report on the company is not needed..

You are not rewarded like a gymnast performing a difficult level of a series of flips..One’s right analysis that was dependant mostly on one single key factor of a stock would be the same payoff as a stock that was appropriately and correctly analyzed relying on many variables..Getting bogged down over analyzing stocks in his experience can actually force you into making mistakes…

You are not going to get called on strikes if you dont execute a buy on a stock..Money managers though have that audience or fans behind them constantly telling them to swing..You as an investor should understand you dont get called out on strikes and dont have to swing at everything your way..You wont get called on strikes so wait for your pitch.

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Here’s what I mean per Peter Lynch about cyclibles..You see where a company produces still good growth in an earnings report but haver lower margins YOY–Wall Street will bring estimates down and you wait till the stock trades down..Wall Street will establish margins down over last year and lower earnings estimates in the future..Then you cherry pick the stock knowing commodity prices being on the low-end will rise–so you buy..

He stated if its a good fundamental stock and a low P/E stock (low P/E low and low top end PE range)..You would buy at its top end P/E range…Buy after depressed prices after seeing margins are decreasing (it was due to seasonally low pork prices)..Then you buy the stock on a downtrend of price..Then since estimates are reduced by Wall Street hold through a few earnings as Pork prices invariably rise and the company will then hopefully smash earnings as pork prices rise..Lynch states many buyers of cyclibles buy when margins have expanded greatly–stated those investors were late in the game on historically higher commodity prices (hence,in this case,pork)..Then the investor gets burned by doing what is usually normal buying at the low P/E range than the higher one…stock tips