A Big Upgrade for Gulf Resources

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In its previous life as a bulletin board penny stock, Gulf Resources (Nasdaq: GFRE  ) didn't garner any better than a three-star rank, but enough top-performing CAPS members have turned bullish on the chemicals maker recently to upgrade it to four stars. A total of 136 members now rate Gulf Resources, with many of them offering analysis and commentary explaining the recent optimism.

The China-based bromine producer has received more attention after pulling off a reverse stock split in 2006 -- a daring move that's been completed this year by Coeur d'Alene Mines (NYSE: CDE  ) and AIG (NYSE: AIG  ) -- followed by a regular stock split in 2007, and approval for a listing on the Nasdaq stock exchange in October. Investors are increasingly taking notice of the company's strength in the bromine market and the growing demand for specialty chemicals. The company reported a solid third quarter with big gains in revenue, gross margin, and net income, and anticipates continuing strong demand from customers.                                     

Increasing fuel demand in China is prompting companies like ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) to build a stronger presence there, and the associated increase in oil and gas exploration -- as well as demand for flame retardants -- is expected to give a boost to Gulf Resources' businesses. It's been able to command higher contract prices and expects the momentum to continue next year. Expanded production capacity helped bring in higher chemical sales and it's upgrading its chemical production line to offer more environmentally friendly chemicals. Many CAPS members like the outlook for chemical demand in China, which will benefit many companies, not just well-known giants like Dow Chemical (NYSE: DOW  ) and DuPont (NYSE: DD  ) .

Do you think Gulf Resources deserves its raised status? Add your thoughts in the comments box below on this page, or head over to CAPS to rate the company and check out all the information the community offers.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 53 points on average, take a free 30-day trial.

Fool contributor Dave Mock recently upgraded his holiday shopping experience by going 100% online. He owns shares of ExxonMobil. Despite efforts to make its distaste known, the Fool's disclosure policy still got a fruitcake this year.


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