Even during bear markets, it is rare to find a small, growing company trading at a hefty discount to its true value. When we’re screening penny stocks, a low P/E ratio usually sets off alarms. Why is this stock so cheap? We sometimes ask. Something must be terribly wrong…

That’s usually the case. The company’s P/E for the trailing 12 months might be propped up by an unusually strong quarter or a one-time payment. Or the company could have unexpectedly announced flat growth for the upcoming year. After all, who wants to pay a high multiple for zero growth? Not I…

Every so often, there’s a break in this trend. A great company somehow slips through the cracks and not a soul realizes its value and potential.

We believe we have found exactly this opportunity. In less than a year, this micro-cap could very well be sitting on a major exchange with a new booming business segment operating in one of the fastest growing nations in the world.

More on this in a minute… First, we have to show you just how explosive this new retail growth can be…

A Designer Chicken in Every Pot?

Decades ago, China’s goal was a chicken in every pot. Wealth was measured by how well you could feed your family from a small plot of land. That was then, as the saying goes. Today’s China is all about consumption.

China’s rapid growth isn’t a well-kept investment secret. There’s money to be made in Asia, and investors are clamoring to get into this lucrative market.

As China’s working and middle classes grow, so too does the country’s purchasing power. Naturally, retail sales have experienced a dramatic surge. Domestic retail sales skyrocketed 20.2% for the first two months of 2008, to more than 1.74 trillion yuan, or about $248.1 billion. That’s more than 5% higher than last year.

While retail sales include food — which has been heavily affected by inflation — and wholesale goods, these aren’t the only statistics padding the numbers. Clothing sales are up 24%. Daily consumer goods are up more than 21%. Household appliance sales are up almost 19%.

One of the true hallmarks of middle-class growth is the sale of these non-essential and luxury items. Even the poorest working members of a society will spend money on food staples. However, the working poor, especially in nations with less-developed economies, won’t be dropping big chunks of their paychecks at the Gap…

Now that China’s economy is well into its adolescence, middle-class spending will continue to grow.

We’ll be following this trend for quite some time…

Best,

Greg Guenthner
April 3, 2008

Greg Guenthner

Greg Guenthner heads up Agora Financial’s small-cap division and is the founder of one of the only independent OTC research advisories in the industry. A graduate of George Mason University, Guenthner joined Agora in 2005 after several years as a journalist. He is managing editor of Penny Stock Fortunes and Bulletin Board Elite.

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