5-Star Stocks Poised to Pop: American Oriental Bioengineering

• Report this Comment On November 13, 2009, at 10:22 AM, anticitrade wrote:

  I couldn't agree more. In fact I just bought this stock myself yesterday because:

  1) It is ranked 15th based on my automated stock picking modle, which values it at about: $7.79 (currently 4.02) (www.anticitrade.com)

  2) This company has incredible growth:

  Revenue has grown from 55 to 110 to 160 to 264 over the last 4 years. Net income as growth from 18 to 37 to 52 to 60.

  3) They have an earnings announcement on November 17th which (based on historical growth) should give a nice bounce to their stock price.

• Report this Comment On November 14, 2009, at 6:07 AM, jamespeer wrote:

  This stock has been beaten up recently, and is available at a significant discount right now, trading around the $4 mark. I am accumulating pre earnings, this company has a long way to go...

• Report this Comment On November 17, 2009, at 10:55 PM, Viking70 wrote:

  Wow, the 3Q conference call did not leave me with the “warm and fuzzy” feeling I was hoping for. I did not get the sense that management had a firm grip on their business. The call was filled with lots of glittering generalities and lots of reasons why revenue missed, why earnings were down, etc. Unfortunately, concrete answers to pertinent questions about future prospects were not forthcoming. For instance, AOB’s two key growth drivers are 1) new products and 2) expansion into rural areas. A natural follow-on to that statement is “how much of your growth (what percentage) comes from rural sales”? The response was basically “Well, our rural sales are predominately generics. Generics account for 30% of our sales.” What the heck? Don’t you sell generics elsewhere, or just in rural areas? What kind of growth are you looking for? Since margins are lower for your generics, how will this impact your bottom line? These are all questions that didn’t get asked, probably because it was relatively apparent that the answers were going to be more vague generalities.

  AOB has good potential, and, you gotta believe that management is doing something correct because cash generation is strong, debt is low, gross margins are good, and sales are up. However, the phone call left me feeling like I was watching a blind squirrel—even they find nuts every once in awhile; is that is what is happening here?

  AOB management placed much of the poor performance on the health care regulatory reforms that are in progress at the moment. The uncertainty created by the reforms led to many end users/clients to limit orders in hopes of getting the product for a lower price once the Chinese government finalizes the reforms. AOB’s distributors also limited sales for fear that end users/clients would request refunds if the price was substantially lower once the government finalizes their decision. This seems plausible. The good news, I think, is that AOB has 61 products on the Essential Products List and 163 products in the National Catalog. The problem is that apparently the Chinese government is going to be setting the prices or price ranges for some of these products. Hmmm…what happens if the price range cuts too deep into the margin? AOB management didn’t mention this during the call. Maybe they have insight that tells them that the prices will not negatively impact shareholder value. Maybe.

  AOB’s brand recognition appears to be strong, and that should be a driver for future growth, but, again here AOB management seems to lack concrete plans. When asked about additional product launches in 2010, the response was “we’ll focus prescription products and those in the National Health catalog.” No mention of new products to take advantage of the strong brand recognition.

  It seems that management has a great cash generation line of products, but is uncertain on how to maximize growth based on that recognition. I could be totally off base here as I am new at listening to quarterly conference calls, and it was quite early in the morning for me (maybe I was just sleep deprived and grumpy). I am currently LONG on AOB, and I will maintain my position for the time being. The stock is already beaten down in my opinion, so, I would think the downside risk is minimal (not taking into account opportunity cost of not investing elsewhere). I will most likely continue to hold until the reforms are finalized and AOB has had time to adjust to them. Suffice it to say, I am not as enthralled with this stock as I once was.

• Report this Comment On November 18, 2009, at 12:16 PM, kahakaiBum wrote:

  This stock was a recommended sell by the Fools just 2 months ago (Septemebr '09) becuase of the problems with management, shady accounting practices, payments made to top management through hidden subsidiaries, etc. Why is it suddenly a "Poised to Pop" stock? What has changed? My understanding is the 3Q conference call didn't do much to convince shareholders that management has a firm grip on their own business....Did I miss something here?

  Thanks

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