“Chinese Medicine and a ridiculous PE — $9 to $100?”

By Travis Johnson, Stock Gumshoe, September 7, 2007

This came in the same email as the Chinese real estate brokerage play we looked at yesterday, and it’s an ad for another Trinity Investment Research product, the Recon Trade Alert that purports to be their exclusive fast trading advisory for small cap stocks.

And we’ll look at the teaser here, but first I have to mention some of the parts of the newsletter ad that I found most amusing:

He says that “it’s not fancy,” “there won’t be a lot of recommendations,” and, my favorite, “no complaining.”

Seriously: “If I make a recommendation that doesn’t take off to the moon, I don’t want any complaints. If you lose money, I don’t want any complaints. “

Refreshing honesty, I suppose … and also a nice contrarian way to advertise, make your subscribers feel like they’re really getting in on something down and dirty and special, no fancy shmancy customer service or anything.

And of course, the best part: “You CANNOT share these recommendations with ANYONE. Do not forward these emails to your friends or family. Do not share them with media of any kind.”

Nothing gets the Gumshoe’s juices fired up like a warning that these recommendations are “top secret” and far too valuable to be shared.

So, just thought I’d note for you some of my favorite “old faithful” quotes from the ad — it’s amazing how many newsletter ads use these same kind of techniques to make you feel like you’re joining an exclusive club with rules, instead of subscribing to an investment advice newsletter.

But anyway — we’ve got a teaser to get to work on. This, as the headline implies, is about a chinese medical stock that’s priced around $9, and “an analyst” thinks it might be headed for $100.

What does this company do? “develop, manufacture, market and sale modernized traditional Chinese medicines with a product portfolio of roughly 10 drugs…but they are banking on one in particular.”

It went public earlier this year.

There’s quite a bit of analyst coverage, considering it’s a newly public small cap: “This has led them to have outlandish coverage on this little $9 stock…with some expecting a 466% increase in revenue next year, and a high price target well over $100 premium to what it is right now.

And here’s something we can say about a few other small cap biotechs: “this stock, if there one drug does go blockbuster, truly could be one of the best investments in 2007.”

So what is Eric Dickson teasing us with for his Recon trading service?

From those limited clues, my best guess is that this company is …

Tongjitang Chinese Medicines (TCM)

They did go public not that long ago, back in March (and a weak IPO — here’s a Fool article about that). And the analyst projections are indeed all over the map — if you have any faith in the analysts, this one is a complete no brainer … according to Yahoo Finance, they’re giving it a forward PE of 1.3. Yes, that’s One Point Three.

OK, so that deserves a closer look. Could this be a case of a newsletter tease that actually understates the craziness of a stock’s numbers and potential?

Their main product, Xianling Gubao, has “trade secret” statu