China BAK Battery, Inc. (CBAK)

[Ecomike]

Earnings (or losses) are out. The quarterly report is out, with another loss, and shares fell again, getting close to a 12 month low again. I see several compelling reasons to call this sell off a buying opportunity. First off, I prefer the idea of a well positioned li-ion battery company play in China, where the rare elements Lithium needed for expansion will not depend on exports to the USA or Japan.

While CBAK has an ongoing stretch of losses, they have been profitable in the past. They claim over 3 million sq ft of manufacturing capacity now. They have about .75/share in cash. And the OS shares has been unchanged for 2 years now, meaning no dilution. The stock holders equity is 146,904,000/62,895,000= 2.34/share and losses have averaged about .06/quarter, with half of the loss being interest on debt. That makes the take over candidate as well as a turn around candidate in my book.

My investment in CBAK shares is in part based on an assumption that li-ion, and CBAK li-ion batteries are about to see explosive growth in sales (with better margins) to the electric vehicle market that is just starting out, all the way from electric bicycles to hybrid buses, locomotives, and ships, as well as power back ups and electric power grid load leveling.

Unlike start ups that have limited, if any sales, like AXPW, AONE, and others that huge monthly losses, CBAK has continuous gross profits (sales minus cost of goods, before taxes, interest and administrative and marketing costs) on significant sales each quarter. They are not far from showing net income after all expenses, profits, and they were profitable before the 2008 crash.

I am a bit of turn around stock, bottom fisher, and this one I have bought at prior lows, and will probably buy more of at the bottom this coming week.

There are many other plays in the alt-energy sector, like Lithium mining, but I think this one has the most upside potential here, and little risk (maybe one of the lowest risks) of going much lower in the short to mid term, due the factors above setting a strong floor value.