...and a Gamble on Ginseng

01/23/2004 12:00 am EST

Focus:

Eric Roseman

Editor, The Commodity Trend Alert

"I'm always searching for bullish trends that are undiscovered by the herd or off the beaten track," says Eric Naimer-Roseman, editor of Commodity Trend Alert. We caution that this thinly-traded penny stock has jumped sharply in price since Eric's initial recommendation. For speculators only!

"I''m betting on a small micro-cap company in Richmond, British Columbia, called Chai-Na-Ta. The stock trading in Canada (CA:CC Toronto) and on the NASDAQ bulletin board (CCCFF OTC BB). This is a $9.1 million dollar Canadian company; it is the world's largest supplier of North American ginseng. Ginseng is used in medicine by the Chinese and now by many leading herbal advocates. T he FDA in the US and many doctors refute the medicinal benefits of ginseng. But the Chinese and many herbalists think otherwise.

"Meanwhile, Chai-Na-Ta is a great earnings turnaround story. After suffering from losses the last several years, this little company is about to undergo a huge earnings explosion. For the first time in years, Chai-Na-Ta finally earned a net profit for the first nine months of 2003 posting a C$2.1 million profit, or C$0.14 cents per share versus a loss a year earlier of C$0.15 cents per share. W hat really caught my eye was that Chai-Na-Ta's largest investor, Hong Kong-based Herb King, converted 10 million non-voting preferred shares into common shares last month, raising its stake from 62% to 78%. In my eyes, that is a very bullish testament to future earnings growth and profitability by a major shareholder.

"Chai-Na-Ta trades at just 5.8 times trailing earnings. This little company has very low trading volume. It is a high-risk speculation because it's thinly traded and highly volatile. But I see this as a superb speculation for a small chunk of risk-capital based on the earnings turnaround in 2004, and the bullish implications from its major investor last month. Chai-Na-Ta trades at C$0.81 cents per share (US$0.64 cents). The 52-week high for the stock was C$1.04 per share. We suggest buying the Toronto-listed shares up to C$1.25."

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