A small-cap China stock for any market

My bull market birthday gift to you: An innovative Chinese ag company with proven numbers

By Louis Navellier Mar 9, 2010 10:12AM

Louis Navellier small cap stocks

On the birthday of the bull market, I want to share  my top small-cap pick with you: An innovative Chinese stock that has the numbers to succeed in any market.

Whether you think the bull market is long in the tooth or whether you think this market is about to break out, the fact is that this top agricultural company is a great fit for any portfolio. That's because it has proven its worth with consistent sales and earnings growth. Coupled with the power of China's booming economy, this has resulted in a gain of more than 430% for this stock since the lows of last year -- and with more gains ahead!

China Green Agriculture (CGA) is one of my top small-cap stocks to buy right now. (Get the complete list of my Top 5 small cap stocks here). That’s because CGA has a great business plan you can believe in -- and the numbers to prove its success. China Green Agriculture is an environmentally responsible enterprise that has pioneered the development, manufacturing and distribution of organic fertilizers across China, proving that rapid economic growth does not have to come at the hands of high pollution.

The “green” fertilizer market in China is booming right now due to the fact that the country’s population continues to grow alongside its economy. This means that more arable land is needed in the coming years to ensure that there’s enough food available to sustain China’s growing middle class. Thanks to its low-cost operations and extensive distribution network, CGA is the right company for the job.

The numbers bear out CGA’s success. The company has topped expectations for each of the last four quarters, with its biggest earnings surprise totaling 40%. After its latest earnings report in February 17, shares surged 10% in just a few days thanks to these great numbers. Specifically, China Green posted a sales increase of 60% year-over-year and a jump of 78% in net income. Gross margins also improved to 61% from 59% last year.

Small cap stocks can really deliver dramatic profits that defy the market because these agile companies don't need a lot of volume to deliver huge gains in just a few days. For instance, in the March 2009 issue of Emerging Growth, published on Friday, March 6, just one trading day before the market set its lowest mark in over a decade, I made two very timely stock picks: Insurance software company Ebix (EBIX) and a natural gas company called Interoil (IOC) that’s based in Papua New Guinea. Ebix is up about 180% since that day and IOC is up over 220%!

Part of those gains came from buying at the bottom, I’ll admit. But the reason those companies posted such explosive returns in the last year is mainly because they are innovative small-cap stocks with proven leadership. They showed consistent growth in their sales and earnings, and I knew that these stocks would perform well whether the market moved up, down or sideways!

Get the complete list of my Top 5 small cap stocks for other winners like CGA. Each of these stocks has what it takes to post strong gains in any environment.

At the time of this writing, Louis Navellier owned shares of CGA and IOC in personal or client portfolios.

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