ETLT.OB

[David Randolph]

I didn't do too badly when I picked one stock from the Video Portfolio to the Main Portfolio, which was PFSW, where I'm gaining 54% here at the Main.

ETLT.OB is a Chinese company that I know very well. I've studied it completely, read all the SEC files, know the business and see it trading at just 4 times earnings. The stock has been laying down there, this undervalued, for a long time ... I could never understand why, I guess it is just because people were not that confident on Chinese stocks, and ETLT.OB always carried a big warning in their SEC files, saying the Chinese currency wasn't freely convertible to the USD.

Of course, nobody is worried about that now, with Chinese stocks running very high, with or without attractive fundamentals. The recent SEC filings from ETLT.OB don't carry the warning anymore, as the company changed its auditors. I guess the other guys were excessively conservative.

I believe the recent enthusiasm for Chinese stocks will make ETLT.OB run at least 200%, to a 12 times earnings valuation (it should go up a lot more, but ... 200% would be just great ).

The stock still didn't take off, but it went up 8.4% with volume above average of 650,000 shares yesterday. This could be the start of something big ... the sun should shine for ETLT too, I've never seen a stock so undervalued remain this way for so long.

The Trading Plan is:

Buy ETLT.OB for the Main Portfolio, 5% of capital.

[David Randolph]

We just need ETLT.OB to cross over $0.74, a paltry 5.7% advance, to make believers out of the skeptics, to make people see the awesome fundamentals of this company.

It seems their cash pile is good for acquisitions, they recently announced two more:

• Eternal Technologies Group, Inc. (OTC BB: ETLT) Purchase Price Reduced on the Two Recent Acquisitions
Business Wire (Mon, Sep 17)

Today I'm short on time (it is a public holiday here in Portugal), but over the next update I'll derive my valuation model for ETLT.OB.

I'll keep holding ETLT.OB for the long term.

[David Randolph]

If it isn't one, it's the other, ETLT.OB has a good shot at a 50% day today.

It's re-comforting to see this stock up, finally. It is another evidence that fundamental analysis may take its time, but it works. It may take months or even years but true value always comes up.

[Dracull]

Excellent timing on this one David, I 'm glad that IB allowed to buy this one...it seems a possible 4$ stock in less that two years time.

One thing, I know that's nothing to do with this stock, but have you ever considered to buy stocks in Europe too? Since most of the brokers have the possibility to trade in several stock exchanges, it could be a good challenge....just a thought 

D.

P.S. - Last weekend I passed near Ericeira with my family, we went to Santa Cruz, Festa da Sapateira, very nice indeed.

[David Randolph]

Excellent timing on this one David, I 'm glad that IB allowed to buy this one...it seems a possible 4$ stock in less that two years time.

Thanks Draccul, unfortunately I had the ability to turn a great 12% advance day into a disappointment, when I wrote the following:

If it isn't one, it's the other, ETLT.OB has a good shot at a 50% day today.

I need to improve on managing expectations.

One thing, I know that's nothing to do with this stock, but have you ever considered to buy stocks in Europe too? Since most of the brokers have the possibility to trade in several stock exchanges, it could be a good challenge....just a thought

Not really, because I don't have Bloomberg or Reuters, and European stocks don't have abundant financial information on the internet ... Europe lacks leadership and the most interesting stocks trade in the US exchanges, not Europe. There should be an European Accounting standard (like GAAP in the US) and just two or three stock exchanges, not 50 or so like we have today. It's a mess, there's still a lot to do in Europe ...

P.S. - Last weekend I passed near Ericeira with my family, we went to Santa Cruz, Festa da Sapateira, very nice indeed.

Yeah, sea food here is great, you need to go to my Restaurant ("Cesar") in Ericeira

ETLT.OB had a nice shot on Friday, I hope this is the catalyst for something bigger. ETLT.OB is so undervalued it is mindblogging (am I spelling this right? You know what I mean ...), I'm even afraid of looking into future possibilities for the company in terms of EPS and share price increases.

I'll just hold and forget about ETLT.OB while it is below $2, it just doesn't make any sense at the current prices.

[David Randolph]

As you can read on the 2nd quarter earnings release from ETLT.OB:

• Eternal Technologies Announces Second Quarter Report
Business Wire (Mon, Aug 13)

... Eternal's management was crying out loud "Hey, we're very undervalued, look at us here, hey ...":

«As of June 30, 2007, the company had $41,961,172 of cash and certificates of deposit or $.89 per share in cash and certificates of deposit. In addition, as of June 30, 2007 its book value exceeded $1.34 per share. As of June 30, 2007, the company also had $45,015,627 of working capital or nearly $.96 per share while total indebtedness was only $2,318,574, the company's total assets as of June 30, 2007 were $65,546,840.»

The market initially didn't react much ... if it were some months ago I would think: "why isn't the market responding to this? It must know something I don't". Now, with more experience, I believe the market is, at times, very inefficient in the way it prices stocks over the short term. Fortunately, over the long term, value always comes up.

That is what is happening now in ETLT.OB, but as I've said, below $2 the company's valuation is a joke, I want to stop laughing and look at Eternal's future in a more constructive way, but I'll wait for $2 before doing that.

I'll continue holding ETLT.OB for the long term.

[David Randolph]

ETLT.OB closed back below $0.74 It has been really difficult to get some bullish traction in this stock ... but it doesn't fall by much either. It is still asleep. Perhaps we'll need very powerful earnings news to make it shine, and I think that's coming. Looking at ETLT's profile, I can't explain why the stock is trading at 4 or 5 times earnings:

«Eternal is a major agricultural genetics and biopharmaceutical R&D firm operating in China with the support of the Chinese Government. Eternal's animal breeding division has a strong asset base, cash position and net income. Eternal has become one of China's leading institutions for biopharmaceutical and biotech research, pure breed cultivation and breed stock production. The Company has secured a key market niche by commercializing gene engineering technologies and providing superior breeding stock, allowing China's citizens the ability to improve their living standards. With the world's largest population, a double-digit national growth rate and entry into the WTO, Eternal Technologies has a playing field set for tremendous opportunity. As a prominent player in the agricultural genetics industry, cash in the bank and an untapped market, Eternal has the potential to become a major player in China's national growth.»

I'll keep holding and studying ETLT.OB, it is a case study for me. One of two things must happen: 1) The stock rises more closer to its intrinsic value or else 2) I find a valid fundamental explanation to why it is so undervalued in terms of its earnings multiple. 

While none of these two things happen I'll continue holding ETLT.OB.

[tokyopua]

I had an order in to double my position here this morning at .74 but it didnt get filled.  Oh well, did double it at .8 when seeing this massive Gspot breakout in progress.  This Gspot breakout is more powerful that what is happening in CHME because the volume looks to exceed the prior spike.   Nice call David!

[David Randolph]

This Gspot breakout is more powerful that what is happening in CHME because the volume looks to exceed the prior spike.   Nice call David! 

Thanks Tokyo

But, if instead of thinking in technical terms you think in fundamental terms, the lower the volume in CHME.OB the better, because it means there aren't many warrants being converted into shares and sold at current prices. That means warrant holders are not willing to sell in this area

[tokyopua]

This Gspot breakout is more powerful that what is happening in CHME because the volume looks to exceed the prior spike.   Nice call David! 

Thanks Tokyo

But, if instead of thinking in technical terms you think in fundamental terms, the lower the volume in CHME.OB the better, because it means there aren't many warrants being converted into shares and sold at current prices. That means warrant holders are not willing to sell in this area

Hmm, didnt think of it that way.  In any case, my multiple applauds to you for today, I put on fairly sizeable positions in ETLT, SDTH, and CHME, as well as CHLN and some others recently too.  Today was probably the best single day I have had this year as a result!  Still holding CIMT, GSB, GIGM and PFSW as well.

I saw in the other thread that you wont be replacing the Fire stocks, but as you find more undervalued stocks, will you then just replace the main portfolio with those on a case by case basis?  This is the first time I have seen the Main fully invested in quite awhile, so just curious where it goes from here.

[David Randolph]

Today was probably the best single day I have had this year as a result!

It was too good, it seems. Some balancing yesterday, no stock goes up 10% plus everyday, and if it does, it probably isn't sustainable. It's better to go like this, shaking weak hands along the way.

Even if ETLT.OB and other Chinese stocks I have were rising just because of "China's bubble motives", I've seen several bubbles develop in my life, and it always works like this ... in the beginning there are lots of doubts and analysts saying stocks are overvalued, so we get two steps forwards and one back, or a 20% advance day followed by a 10% pullback. There are going to be four or five meaningful pullbacks as stocks push higher and higher, and people keep getting pushed aside of the spectacular rise. At some point in the parabolic ascension, people decide that this time, they won't be shaken out by any pullback, they will hold for the long term, because they're so tired of missing the biggest part of the upside move ... that's when the REAL decline comes, one that usually takes the bubble stocks down below where everything started, that is, down more than 90%.

But, even though market participants see it this way, ETLT.OB has nothing to do with this story. ETLT.OB is deeply undervalued and below $2 is an insult. I shouldn't be talking to anybody insulting me, ETLT.OB is not to be talked under $2. But since it is my job to talk, I'll do it. Just kidding here

I saw in the other thread that you wont be replacing the Fire stocks, but as you find more undervalued stocks, will you then just replace the main portfolio with those on a case by case basis?  This is the first time I have seen the Main fully invested in quite awhile, so just curious where it goes from here.

Well, eventually I believe my stocks will go from undervalued to overvalued and I'll take profits in them and buy other stocks. But I'll hold these 15 until they give me what I see they should give, or until my view of the situation changes.

I'll keep holding ETLT.OB.

[tokyopua]

Today was probably the best single day I have had this year as a result!

It was too good, it seems. Some balancing yesterday, no stock goes up 10% plus everyday, and if it does, it probably isn't sustainable. It's better to go like this, shaking weak hands along the way.

Even if ETLT.OB and other Chinese stocks I have were rising just because of "China's bubble motives", I've seen several bubbles develop in my life, and it always works like this ... in the beginning there are lots of doubts and analysts saying stocks are overvalued, so we get two steps forwards and one back, or a 20% advance day followed by a 10% pullback. There are going to be four or five meaningful pullbacks as stocks push higher and higher, and people keep getting pushed aside of the spectacular rise. At some point in the parabolic ascension, people decide that this time, they won't be shaken out by any pullback, they will hold for the long term, because they're so tired of missing the biggest part of the upside move ... that's when the REAL decline comes, one that usually takes the bubble stocks down below where everything started, that is, down more than 90%.

But, even though market participants see it this way, ETLT.OB has nothing to d with this story. ETLT.OB is deeply undervalued and below $2 is an insult. I shouldn't be talking to anybody insulting me, ETLT.OB is not to be talked under $2. But since it is my job to talk, I'll do it. Just kidding here

I saw in the other thread that you wont be replacing the Fire stocks, but as you find more undervalued stocks, will you then just replace the main portfolio with those on a case by case basis?  This is the first time I have seen the Main fully invested in quite awhile, so just curious where it goes from here.

Well, eventually I believe my stocks will go from undervalued to overvalued and I'll take profits in them and buy other stocks. But I'll hold these 15 until they give me what I see they should give, or until my view of the situation changes.

I'll keep holding ETLT.OB.

Great, thanks for those answers, I like the direction of the new portfolio now that I understand it.  And yes, it took some screaming and kicking from many of us purely short term traders.
So that being said, thanks again, and applaud.  Thats 1000 well deserved applauds right there, may we be lucky enough to have your service available for 1000 more!

[Terliso]

Adding ETLT in my portfolio, the technicals are too good to pass on.
I started shopping chinese stocks last trading day of this week ... thanks David.

[Terliso]

ETLT is showing a nice candlestick today, appetizer for my entry...

[David Randolph]

Great, thanks for those answers, I like the direction of the new portfolio now that I understand it.  And yes, it took some screaming and kicking from many of us purely short term traders.
So that being said, thanks again, and applaud.  Thats 1000 well deserved applauds right there, may we be lucky enough to have your service available for 1000 more!      

Yeah, sure Tokyo, I'm here for the long term Thanks.

Adding ETLT in my portfolio, the technicals are too good to pass on.
I started shopping chinese stocks last trading day of this week ... thanks David.

ETLT is showing a nice candlestick today, appetizer for my entry...

You're welcome Terliso

It looks like investors decided to stop insulting ETLT's management and stock and instead start doing some business with them. I'm looking at about $0.15 EPS in 2007, so the stock is trading at 5.9 times earnings. It should be triple that.

I'll continue holding ETLT.OB with strong hands.