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Ride the rails on Guangshen (GSH)
"On the heels of a blockbuster profit report, were are delighted to recommend Guangshen Railway Company (NYSE: GSH) as the latest addition to our model portfolio," says Jim Trippon. The editor of the The China Stock Digest explains, "The company’s expansion plans and its favorable geographic position indicate that Guangshen will be a major beneficiary of China’s growth." "On the day we put out our 'buy' alert, the company announced a staggering 92.4% increase in net profits, yet the company’s ADRs hardly responded, creating an excellent buying opportunity. Profits have now topped $200 million and the company continues to expand. "Guangshen is a little-known company among Americans and unless you had taken a train ride from Hong Kong to the boomtown of Shenzhen, there’s little chance you’d be aware of it. "The company is serving passengers and expanding capacity in one of the wealthiest and busiest nodes of the new Chinese economy. It’s considered the 'most modernized' railway in China, and demand continues to grow as the Chinese government permits the flow of passengers between Mainland boomtowns and the Hong Kong special administrative zone. "China’s plan to spend almost $13 billion to upgrade its railway network has helped fuel a rally among railway stocks, and we believe the long term trend will continue. Demand is high because railway transportation is considered one of the great bottlenecks in the Chinese economy. "Because there are fears that the train system may become overloaded with freight and passenger traffic in coming years, the railway has plans to build four more lines and to buy more rolling stock. "Looking forward, the company is building more lines, acquiring more high-speed trains and buying up regional railroads. Although the company is constrained by price controls, its profit picture indicates an ongoing control of costs. Guangshen’s profit margin is 17.86%. "Although Guangshen’s P/E ratio, above 20, is slightly higher than the industry standard of 18, Guangshen is growing much more rapidly than its peers. Consequently we’re recommending this stock as a 'Buy' at a price of $29 or less. "Our target sales price for GSH is $45 and our stop loss profit protector is $20. We don’t believe the stock has much downside risk as its book value is above $20 per share and earnings are growing." by TheStockAdvisor (TheStockAdvisor.com) Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital. |
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