Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.
Ian Wyatt, editor of Growth Report, chose LJ International (NASDAQ: JADE) as his favorite for 2007, which rose an exceptional 173% and put Wyatt in the top spot among all advisors in the annual report. Here is his original recommendation and his current opinion on the stock.
For his favorite for the balance of 2007, he continues to look toward China, with his selection of Harbin Electric Inc. (NASDAQ: HRBN). The advisor explains, "Harbin is a growing manufacturer of linear motors in China. Revenues are currently derived in China, but the company has its sights on international markets.
"Strong demand for industrial applications in China will drive the market for linear motors, including factory automation, airport applications, packaging and the oil service industries. Low-cost manufacturing facilities in a modern, 200,000-square-foot manufacturing facility, coupled with cheaper labor costs in China, give Harbin an added competitive advantage.
"A linear motor is an electric motor that produces linear force, in contrast to the rotary torque produced by conventional motors. More important, linear technology is clean, efficient, and generates high speeds. Other advantages include quietness, lower long-term maintenance costs, small size, easy control and installation, and the ability to be used in adverse conditions.
"The semiconductor market has been the most significant market for linear motors, but the rising awareness of linear motors and lower costs have helped to attract more industrial applications. For example, as applications become smaller, the use of linear motors is increasing because they can be manufactured to small dimensions. Applications that require nanometer precision are expected to rise, which will help drive demand for linear technology.
"An area that holds promise for linear motors is the global rail mass transportation market. Rail systems using linear propulsion are more cost effective, save energy, are environmentally friendly, and are safe and reliable, according to management.
"Harbin's management is firmly behind the push into mass transportation systems. In addition, the Chinese government is supporting the development of the country's linear motor industry via research grants. A Harbin subsidiary is working on building a linear-powered train and track transportation system to be tested at the Beijing Airport railway line.
"In another sign of the promise that linear motor technology holds, Harbin recently commenced shipment of customized motors to a 'large diversified automotive OEM supplier based in North America' to be used in electric seating applications.
"In the first quarter of 2006, revenues grew 54% to $13.6 million. Net income in the quarter totaled $3.4 million, or $0.19 per diluted share, versus $3.8 million, or $0.23 per diluted share, in the year-ago quarter. It should be noted that excluding a $0.06 per share non-cash charge related to amortization, EPS would have been $0.25 per share.
"HRBN is estimated to earn $0.74 per diluted share on revenues of $60.3 million in 2007, according to a single estimate gathered by Thomson Financial Network. For 2008, the company is estimated to earn $1.40 per share on revenue growth of 74.3% to $105.2 million.
"Based on these estimates and the current price of $13.34, shares of Harbin trade at 18 times the current year estimate and a low 9.5 times the forward year estimate. At these pricing levels, we feel shares of Harbin Electric are a solid Buy with a price target of $18.00, which represents 24 times the current year earnings estimate and 13 times the forward year estimate.
"Harbin Electric has demonstrated excellent revenue and earnings growth. Future growth will be driven by the increased acceptance of linear motors solutions as costs decline and applications rise.
"With $57 million in cash, the company's strong cash position should allow for the development of new products, along with further expansion in both China's growing industrial manufacturing market and international markets. The company's listing moved from the OTC Bulletin Board to the Nasdaq Stock Market on Jan. 31, 2007."
See all 20 stocks the advisors picked for the second half of 2007.
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