Wednesday, October 10, 2007

SEED germinates!

Origin Agritech (SEED 12.73) was up 5 dollars today on 23 million shares! Monday I brought this number to your attention at 7.69. It was named on Forbes Asia "Best under a Billion" companies. If you missed the move, maybe you should reread my blip Monday on "derivative" plays. And when you re-read that, you should read the September 7th SEC filing on CSCA, and the information on Liaoning GaoKe Energy Group of which CSCA is acquiring.

Upon completion of a successful merger, I think CSCA could have a two handle. The warrants, CSCAW, with a strike price of 5, could be worth three times their current price. However, the merger must go through, or you'll be left holding the bag, as CSCA is a SPAC (Specified Purpose Acquisition Company), and you'll be left with $5 of cash, and worthless warrants on a failed deal. The merger is supposed to close this quarter; so it's a stock that's worth watching the news for.

So how do you get a "free play" on CSCAW on the Chinese Casino taking over Wall Street? Well, if you read the SEC filings, you'll see that GaoKe is a leading provider of distributed power generation and micro power grids. Now follow carefully. Jinpan International (JST 26.93) which sells resin transformers for the power industry in China, on their last earnings report in August, saw big growth ahead for the power industry. And I think you should be able to make enough off of this play, to have your CSCA play for free. Here's why.

Sometime in the next day or two, I suspect some hedge fund or daytrader will do some digging on SEED. And they'll come across Jinpan International. They'll see it has a small float, it's on the AMEX, 95% of their business is in China, and they see strong second half growth. When they discover it, and ping their buddies, the stock should move like ATV did today.

Why would someone who bought or missed the SEED trade stumble across JST? Besides being fundamentally cheap, the catalyst for Origen Agritech moving, was the blessing of being on Forbe's Asia "Best under a Billion" list.

Who else is on that list?

Jinpan International.