“Chinese Penny Stock Lands Deal with Wal-Mart”

By Travis Johnson, Stock Gumshoe, March 8, 2010

“What happens when a tiny Chinese Penny Stock lands a deal with Walmart?

“This tiny company’s amazing new product line will be sold by the world’s biggest retailer (with 4,258 U.S. stores). Similar deals have rewarded early investors with gains of 1,838%… 748%… and even 10,775%.

“‘Our factories are working overtime to keep up with customer demand. We believe [we are] on track to achieve [a] year of record sales.’ — CEO of this tiny Chinese Stock”

That’s how the latest ad launches for Frank Curzio’s Penny Stock Specialist, the newsletter he launched with Stansberry & Associates after coming over from TheStreet.com, where he had written a newsletter with a similar focus. I don’t know how his new letter is doing, but it’s certainly getting some marketing support — and he has identified a couple interesting ideas for us so far, including TriQuint, the Apple supplier that has done pretty well since he teased it about six weeks ago (that one’s also still being actively teased, including later on in this same ad letter). So perhaps it’s worth taking a look-see at his new teaser, eh?

This tease is all about a Chinese company that landed a deal with Wal-Mart to sell their products. Getting into Wal-Mart has long been the holy grail for small manufacturers, of course, though the pricing pressure also sometimes makes them question what they had wished for … here’s how the teaser puts it:

“We conservatively estimate this deal could help send the share price of this penny stock up by more than 200% over the next few years, no matter what happens in the U.S. economy or the stock market.

“How can we make such a bold prediction?

“Well… if there’s been one investment strategy that has reliably paid off big-time over the past decade, it has been to invest early in small companies that land lucrative deals as Wal-Mart suppliers. “

And they give a couple examples of under-the-radar stocks that had huge boosts from Wal-Mart sales increases, Cott Beverages and RG Barry.

And what do we learn about today’s “penny stock” that has a deal to sell their stuff to Wal-Mart?

The first clue is that they sell “kitchen products.”

The second is that they got their Nasdaq listing after doing a “reverse merger” with a publicly traded shell company, (very common for Chinese stocks these days — in part because it’s a lot harder to get in line to raise money on the Shanghai market than it is in the US).

And one final spate of clues:

“For one, as I’ve been detailing, they landed their first multi-million dollar deal with Walmart, and will produce kitchen products to be sold under various brands.

“The company also landed a deal with the second-largest electronics retailer in China (with 885 stores). Conservative projections for sales in these stores in 2010 is $29 million. One firm, whose work we respect (William Blair & Co.), says: “We expect domestic (China) sales growth to exceed 300% in 2010.”

“This tiny Chinese firm has also secured deals to manufacture products for Home Depot, Target, Tesco (the world’s 4th biggest retailer), Black & Decker, and Toastmaster.
What I also really like about this firm is that they have basically no debt and their sales are absolutely skyrocketing….

“… this firm still handles some things the “Chinese way.”

“What I mean by that is, they are very secretive. For example:

“First, the company does not hold conference calls for investors, which is unusual for a penny stock listed on the NASDAQ. They also do not provide a U.S. phone number, although nearly 35% of their sales are from North America.

“Also, this company just purchased a small competitor in China, but did not release the name or terms of the deal… only that in 2010 they expect to earn $2 million from the acquisition.

“The point I’m trying to make is simply that this is a very small and little-known stock. Yes, it has just landed a deal with the world’s biggest retailer. But companies that are this small, especially those with operations about 7,000 miles from Wall Street, have definite risks.”

So who is this little “penny stock?”