“Only ONE China Stock — Before Tuesday”

By Travis Johnson, Stock Gumshoe, July 18, 2007

A quickie here from Robert Hsu — he just sent an email out telling us (after an exhaustive recounting of his successful China calls, including the Chalco play that Skousen has also been touting), that there will be a big pop in one of his favorite China stocks next Tuesday.

Well, that sounds pretty precise and actionable, eh? He said that his “on the ground” research allowed him to foresee that demand for aluminum in China was dramatically higher than most analysts predicted … can he also foresee a beat on earnings for this other company?

Well, I suppose it’s worth finding out. I’ve seen a few positive mentions of Hsu’s services over at the Gumshoe Forum, where folks often comment about newsletters they’ve tried and like or don’t like, and while I think it would have been difficult to be a bad China advisor over the past two years it’s certainly true that he’s got a repository of winners.

So what is the ONE stock we need to buy before Tuesday, according to Hsu?

Turns out, it’s one we’ve looked at before.

It’s a play on what he calls “Sea Turtles”, the Chinese students who were taught English after class in the 1980s, then went to the West for University degrees, and now are the business barons of the new China. This is fomenting a huge desire for English classes in China because that appears to be the path to riches, and this company is a leading provider thereof.

In Hsu’s words, “China’s top English-language trainer is reporting earnings Tuesday. I expect a quick 25% – 35% gain as a result of the company’s great earnings … Earnings … will show expanding margins for the company and the reason is: when you are the top brand, you can put up your prices.”

Thankfully, though he does say he thinks this stock will give you a double this year, he also specifically says, “no guarantees.” So cool your jets a little.

Then again, he is standing behind a pretty rapid advance: ” Indeed, if this stock doesn’t jump on earnings and make a dash for another double in the next 90 days—I’ll refund every penny of your subscription fee.” Maybe he’s been actually doing some channel watching and checking on the prices for EDU’s classes.

The Gumshoe, of course, will refund you none of the time you’ve wasted in reading this writeup. It’s lost forever, I’m afraid.

And in it’s place, all you’re left with is the name of this firm … which is …

New Oriental Education (EDU)

This is a stock that Hsu has been recommending for a while — and we even sleuthed it out back in March on a prior teaser. It’s up about 30% since that teaser, so if it’s going to go up another 30% after earnings, and double by the end of the year, we’re talking about one hell of a stock.

And, arguably, that’s what EDU is. Analysts are pegging this one with a forward PE of 46, so I really hope that Hsu is right and they’re going to blow out earnings. Any disappointment in earnings or outlook might really whale on these shares, and I of course have no real idea of exactly how much of a “beat” is priced in.

Then again, the August call options pricing right now is pretty modest, given Hsu’s certainty — some people think the shares are going to go up by 8 or 9% in the next month. Not too outrageous for a fast-growing China company ($55 calls, which are right about