Thursday, August 13, 2009

A potential IBD 100 trading idea - RINO (RINO International Corporation)

This is a stock that has had a big move but pulled back since reporting good but not good enough earnings after strong move. It's another China play (like my recent picks RCON, DGW - you can click the blue RCON for that recommendation) - this time on environmental protection equipment. Has been compared to DGW which is a water treatment IPO that I nailed for a 50%+ gain this year. You may say why buy now? after the big run? after earnings? what is the catalyst. It's the IBD 100 potential it has. You ask what is IBD 100 potential? IBD 100 is a list of 100 stocks that are profiled in Investor's Business Daily a widely read and respected investing newspaper every weekend. To be on the IBD 100 you have to meet "black box" criteria from IBD that qualifies you. Basically the rankings are based on earnings and relative strength. After RINO's recent earnings report it now has a 99 EPS rating and a 99 relative strength rating. This is as high as it gets, but RINO is not yet in the IBD. The reason is a stock has to be over $15 to get into the list. There is often a natural attraction for traders to identify these IBD plays under $15 and push them over the $15 so they get included in the list and get additional exposure that can cause some stocks to run (check FUQI for an example of a runner after getting above $15). Also, with a 99/99 it should be in the top 10 on the IBD list if it closes above $15 tomorrow or any Friday soon. So for a trade buying RINO here around $14 should be good for at least $1 and maybe a lot more. I bought today at $14 and will add if it dips down to $13.5. My stop goes under $13 for now.

Besides all this IBD stuff the company made 89 cents in the first 6 months of 2009 and has growth ahead of it. Therefore, if you double that .89 you get about $1.80 in earnings and the stock trades at only $14 so it has a pretty compelling stand alone valuation angle to it as well.

A little more color on RINO

Rino makes environmental protection equipment for the iron and steel industry in China. Specifically, Rino makes wastewater treatment, flue gas desulphurization equipment, and high temperature anti-oxidation systems, which are all designed to reduce either industrial pollution and improve energy utilization. Rino does make equipment to ensure than steel producers in China are not polluting water supplies. Rino is also set to benefit from the Chinese government enacting stricter environmental standards.

1 comment:

  1. RINO -

    Hope you got out before they were exposed.


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