China Model Portfolio Changes

Our portfolio position China Armco Metals (CNAM) had big news today. The company announced a $100 million supply contract for scrap metal which means that it has already sold all of the production from its recently completed recycling facility for the first several months.

CNAM's stock price doubled this week on the news but for those of us who were following the company for a while it is no surprise that they will actually sell their recycled steel from the new factory. The growth potential for CNAM is huge but in the end only those plain numbers will matter and my projection of $1.00 EPS for 2010 has not changed. I consider CNAM fairly valued at current levels and as the stock is trading above my target price of $9.00 I am closing the position here.

I am selling 1500 shares of CNAM at Friday's close of $9.60 for a 185.71% gain or $9,360.

Lotus Pharmaceuticals (LTUS) entered into an agreement to sell up to $10 million of common stock, periodically, at app. 10% discount to market price. It was expected that the company would need to raise capital and the terms are reasonable and shareholder-friendly.

After doing a little bit of maths, my 2010 earnings projection stays unchanged at EPS $0.45. However, I am reducing the target price for the portfolio position to 8x 2010e EPS or $3.60 which still leaves 160% upside from current levels.

The Chinese Small Caps sector looked very strong this week and volume indicates that institutions are currently rebuilding positions. I will 2-3 new positions to the China Model Portfolio this weekend, stay tuned.