China Energy In Uptrend: One of the Few
November 17, 2008 @ 2:57 pm
CGYV is in a confirmed uptrend based on today’s action in the stock.
The company delivered an awesome quarterly report, and the Westly connection with the company is staring to come out. It’s not surprising investors want to own the same shares of a company owned by the guy who is likely to become the next Secretary of Energy-and, own them at a lower price.
Technically, here’s what everyone should be looking at:
As you can see, another big volume day took the stock up very nicely. It traded to a high print of $2.25 today, much more than a double from the all time low.
Also- note the stock is surging on high volume days, and pulling back on low volume days. In short, the highs are getting higher, and the lows are getting higher. This suggests accumulation. The stock is quite volatile on any sort of volume as there aren’t a lot of forced sellers anymore- they seem to be all cleaned out.
The last big surge took the stock from under $1 to over $2 in two trading days. This one took the stock from $1.50 to $2.25 in one trading day. Nice move.
It pulled back in the last couple of hours of trading, and ended up right on the 38.2% retracement line.
As it stands right now, $1.80 would be the ideal place to accumulate, but you might have to settle for the closing level of about $1.95. If you don’t own it yet, I would take a partial position at the current, sub $2 level, and keep your powder dry for a move down to $1.80 in case it gets there.
The performance of this stock is a rare treat in this environment. It’s tough to find anything in a confirmed uptrend.
Comments and questions are welcome.
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I have a real good feeling about CER. How would I join. The fee to start would be low, however it will grow within time. Why is this CER in a strock assesment and not just straight Investment trades. I am a senior and healthy but I need to focus on the next 10 years of some kind of retirement wealth money. Also, do you know anything about Trademasters Investors/Trigger? Please reply Teresa Thanks.
Editor: Teresa- not sure I understand your question. I’m glad you have a good feeling about CER. I believe the company will deliver in excess of $40 million in 2009- up from about $23 million in 2008. I also believe the stock will do extremely well sometime during the year. It’s been trading quite nicely the last few days. In order to receive the OTC Journal, simply input your email address at the home page, and reply to the responder email. I don’t know Trademasters or their philosophies.
Comment by Alma Teresa Turrubiate — 1/1/2009 @ 10:02 pm
So, what do you think of his pick for energy secretary? Chu vs Steve Westly. Do you know anything about Chu? Thanks Verland
Editor: Comments in the current BLOG - I think he’s great- read some quotes from him. He’s a huge proponent of Energy Efficiency strategies, and he’s Chinese. Plays right into our theme on China Energy.
Comment by Verland — 12/11/2008 @ 2:55 pm
To fund another facility, what price do you believe management is targeting for a secondary offering? Or financing?
Editor: There were already pledges of capital, but the issue is price. The company would rather stay in its current facility than raise capital at this price. They might have a plan to continue renting in a larger space. We’ll see next year.
Comment by Lewis — 12/10/2008 @ 7:27 am
The U. S. Market and SSO are down today. FXI is up. Looks like the Chinese market is bottoming and your ideas on China will payoff. Thanks for the great info.
Editor: Not out of the woods, but making progress. A solid break abover 900 should bring 1,000 into sight for the S&P 500.
Comment by Rick — 12/5/2008 @ 10:10 am
The upside of this company almost sounds to good to be true especially with the endorsements from the afore mentioned energy celebrities . What exactly are the possible downsides to this company and its business plan . I could always evaluate all the other downsides to every other company that you have recommended based on my own business experiences , but I don,t find any with this one . The market has killed a lot of faith and trust for the average investor so there would not be a better tonic than a solid winner .
Editor: Clearly, the macro downside is a slow down or recession in China, which doesn’t appear to have effect CGYV yet. There’s no saying it won’t. That’s the obvious challenge for the company. In fact, the $900 billion China stimulus package might be a huge benefit to them. There’s a bigger challenge no one is really addressing yet. The company can go up to $40 million t0 $50 million in annual revenues before it maxes out its capacity. With the current infrastructure there is no upside above $45 million in annual revs. They had planned to do a financing to build a new facility by this time, but won’t do it at this absurdly low price. We’ll need some clarity on that issue to have upside beyond 2009, because I believe they will run out of capacity by Q3 ‘09. I feature the company frequently because I think investors with the courage to act should own this one.
Comment by andy — 12/4/2008 @ 7:03 pm
Reading your last question/answer got me thinking…is CER targeting new factories to install their product during the construction phase…CER “components in the design” so to speak? Thanks in advance.
Editor: Most of their business is new construction. Very little of it is “retrofit” systems. That side might pick up with the China stimulus package- they might retrofit some old factories. However, retrofitting is far more expensive than building into new construction.
Comment by Lewis — 12/3/2008 @ 10:42 am
There are reports of china closing factories due to the ecomony what effect will this have on cgyv? I was going to sell my spkl shares to buy more cgyv but I am holding to see whats happens
Editor: Actually, the changes in the manufacturing infrastructure are helping CGYV. The inefficient, older factories are the ones that are closing. China has a stated goal to become 20% more energy efficient by 2011. With the slow down, older factories can be retofitted, and the new ones being built have the components in the design. The $900 billion stimulus package will include a great deal of capital for energy efficiency. I think the company will exceed $40 million next year. They have about $20 million in signed contracts now.
Comment by Anonymous — 12/1/2008 @ 11:06 am
Is there a competitor worth noting for this company? Thanks.
Editor: GE has a division that makes an energy recovery system without the pollution removal component.
Comment by Lewis — 11/29/2008 @ 12:27 pm
Do you have a feel for the PR frequency or whether this company is entering into a period where the Press Releases about contract signings can be rather continuous for a period of time? Thank you in advance.
Editor: No, I can’t predict the next contract signings. I would only point out based on the last one, contracts are getting larger. $11.2 million was the last one. Who knows what’s coming next.
Comment by Lewis — 11/25/2008 @ 9:41 am
Have you met Adam Roseman or ever discussed his views/investment in CER? I’d be curious as he and his family seem like “heavy hitters”. Thanks in advance.
Editor: Sure- he thinks the stock is going to $10.
Comment by Lewis — 11/24/2008 @ 10:14 am
Since the numbers are out, In your valuation do you still see the stock price for the short term $3.00 & the long term around $5.00…. Im not very good at reading a finacial statment, but from what I see it seems that it should be a little better than those numbers. Thanks Verland
Editor: Yes, it’s easy to see those kinds of levels. In fact, in any sort of reasonable market, I would see a company with this type of growth are earnings to something more like $10. Here’s a couple of traditional metrics. $6 million last quarter- let’s say they have annual revs of $25 million- five times revs would put the stock at $4.50- a traditional belief is stocks can trade at a PE ratio equal to their growth rate. Let’s say they make $3 million next year- 100% growth rate- $10 would be fully valued. There are not too many ways you could value this stock that wouldn’t put it a lot higher. I suppose if you expected it to trade at the same PE as the S&P 500 next year, you could say it’s fully valued. However, there are no stocks trading on the S&P 500 with 100% growth rates. There might be PE contraction, but it won’t be to those extremes.
Comment by Verland — 11/18/2008 @ 1:50 pm