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Froth On the Stock Market Cappuccino Starting to Form

Valuations in the small and microcap world are slowly but surely starting to rise to more reasonable levels.

If the market were a cappuccino, one might say it has been missing the best part- the froth. After last year's severe drubbing, small and microcap stocks were beaten down to historically absurd valuations. This end of the market was down to just the bitter espresso at the bottom of the cup. The expresso is the real kick of the beverage, but the foamy milk froth is the best part.

Sanity is returning, and along with it I'm seeing some solid appreciation in stocks that deserve to be much higher. Take China based Universal Travel (AMEX: UTA). This is one I've been watching for sometime, and am kicking myself for not buying when it was cheap and the world believed the entire Chinese economy was headed down the toilet.

Universal Travel, is a reverse merger story on the OTC BB- it traded under the symbol UTVL. I watched it trade forever in the $.90 range- barely moving on almost no volume, while the company continued cranking out great earnings reports.

As you can see, the stock traded for 8 months in the $2 range- which back then was about $.90- the company did a 3 for 1 reverse split in late March. It moved the stock into the $2 range, and it headed north from there. 

Since the reverse split, the company hasn't really delivered any blockbuster new events for the market. They reaffirmed their guidance for just over $1 per share in EPS this fiscal year, and to the benefit of shareholders who were patient, the stock has simply rocketed up the charts. BTW- I believe this stock is probably going to $20. Based on their growth and earnings, it certainly deserves to do so. 

The market has put the froth back on this cappuccino, and there's plenty of other examples around. The company also recently moved from the Bulletin Board to the AMEX- so there are stocks trading beautifully that follow this path.

Froth In My Large Cap Ideas As Well

Have you checked out any of my large cap ideas lately from earlier in the year? How about FXI- the ETF on the large cap China stocks- I first recommended FXI in January at $28- and called it a must own at $25 in February. Have you noticed it closed at $39.04 on Friday- that's 56% on your money in a cash account, 112% in a margin account.

Or how about EWZ- the Brazil ETF I picked on December 13th. It's right there on the right hand side of the menu bar at $35- These are the large cap, resources oriented companies of Brazil. $55.88 at Friday's close- that's 60% cash return- 120% margin return.

Also- one more to jog your memory- how about TBT- my "easy money" idea published on January 3rd. Click Here to read that edition. TBT- the inverse ETF on the long bond (it goes up when long term interest rates go up, or bond prices go down)- I picked it at $39, and called it my easy money trade for Q1 '09. It closed at $56.94 on Friday- net return 46% roi, or 92% in a margin account.

It's nice to see a little froth back on top of the bitter espresso in the bottom of the cup. Some of the less successful, higher risk stories will start getting frothy again as well, and be very important to OTC Journal subscribers.

Upcoming Idea with Little Froth- and Several Dropped

I'm sticking with the China theme for the foreseeable future, and have about five new ideas in that arena between now and the end of the year. The first one will be introduced next week. The numbers mirror Universal Travel (UTA) , but the stock has not moved yet- there's real numbers, great growth rate, and a very low PE. I'll offer it up about the middle of next week.

I've just returned from a two week trip to Europe where I had the opportunity to meet with a number of China companies who were presenting to Swiss money managers. For the future, my China ideas will have a common theme-  They will all be involved with either infrastructure build out or consumer related businesses. As more of China's 1.3 billion citizens come out of the ancient agrarian world to the new modern society, they are in need of better infrastructure and more consumer goods. There won't be any manufacturing export companies. Exports will continue to suffer from recession driven lack of world wide demand.

To give you an idea of the scope of this market size- there are 6 cities in the United States with populations of 5 million. Know how many there are in China? You guessed it- 51. We've all heard of Shanghai and Beijing, but most Americans have no idea of the scope of the opportunity that lies in those 51 tier 2 and 3 cities. They are all growing like crazy.

As it stands right now, next week's idea is trading at about a 6 PE with a strong balance sheet and trailing growth of over 50%. I'm expecting 100% growth this year. With any sort of froth on the espresso, this one could be a 10 bagger from current levels.

In order to make room for a series of new ideas I have coming, I'm going to have to drop some of my old microcap followings. I'll no longer cover Nighthawk (NIHK)- they just aren't delivering the growth. I'll also drop Nuvilex (OTC BB: NVXL- this one might do really well) as I don't see them delivering the kind of growth I'm seeing out of China, and Stratos (OTC BB: SRNW) which I never wrote much coverage on to begin with.

More recent ideas Options Media (OPMG). IX Energy (IXEH), and SingleTouch (SITO) all have real merit and should have great growth this year. We're off to a poor start with all of them, but there will be some froth coming to their espresso as well. Make no mistake about it, they all have very prolific upside.

Do You Twitter?

About a year ago I asked my techies if there was any way we could get ideas to investors with text messaging to cell phones. I was prepared to spend some money as I saw this as the easiest way to quickly notify investors of important events.

The folks at TWITTER did it for me, and it's all free. Worth waiting for. Set up your TWITTER account (free), and become a follower of the OTC Journal. I'll use it for quick updates and coming events.

Just go to, and enroll. From there, adding to your Twitter network is a little tricky, and there's a learning curve. Then, go to the home page at, and click on the "Follow" button on the Twitter box. Or, go directly to

Sign up today, join as a follower, and I'll start using it to everyone's benefit. Tell your friends to sign up as well.

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