Out Fox The $treet

TheStreet.com interviews Joe Giamichael, managing director and head of China research at Global Hunter Securities, about his bull case for the recycling sector in China. A couple of stocks that we follow in the recycling area include Lihua International (LIWA) for copper and China Aramco (CNAM) for iron ore. Along with Stone Fox Capital, Joe is bullish on LIWA. He provides some great details on the discounts for scrap copper and how cheap the stock remains. CNAM continues to be a play that we follow though it continues to struggle with its recycling facility.

As we've been writing for the last month, the China economy and hence the local markets continue to rule the world. See China Market Rules the World on June 30th. Last night, the Shanghai market surged over 2% and made a very impressive jump off the 50EMA showing signs of more gains coming in August. Copper has also been surging and met coal prices remain steady so the commodity stocks such as Massey Energy (MEE), Alpha Natural Resources (ANR) and Freeport-McMoran (FCX) continue to be our favorite domestic stocks to play this theme. Additionally, we continue to follow China based commodity plays and mainly 3 companies that are dramatically expanding operations but remain at show me valuations. Puda Coal (PUDA) is acquiring and consolidating numerous coal mines and trades at a 4x '11 estimates. China Armco (CNAM) recently started up a steel recycling facility that should lead to $200M in revenue for a stock trading for $50M. Lihua International (LIWA) recently doubled its copp...

Even in the face of a 40% mining tax, China is still busy investing in Australia . That seems rather remarkable as any company or country with time on its hand would rather skip or defer any investments in Australia at this point. Maybe they have some inside knowledge that the proposed 40% tax will be greatly reduced, but this type of move only gives the government of Australia more ammunition to implement the tax. To us this signals how ferocious the demand for mineral assets is in China. How its not about to end any time soon. And how any assets outside of Australia at the moment are very attractive because of the tax issue. Notice how they seem desperate for iron ore mines that will supply the steel industry. This leads us back to investments in scrap steel recycler China Armco (CNAM) and met coal producer Puda Coal (PUDA). Both are Chinese companies recently up listed in the US that will benefit significantly from continuing strong steel demand in China. CNAM just opened up a recyc...

Postings have been slow of late because of moving into a new house. Regardless, we've been focused on taking advantage of the drop in the market. Yesterday, the Opportunistic Portfolio bought Massey Energy (MEE) and China Armco Metals (CNAM) and covered the short on Research in Motion (RIMM). Unfortunately besides a small short on RIMM, we missed reducing exposure on the drop, but we're confident that we picked up MEE and CNAM on the cheap yesterday. Last check that portfolio is up nearly 8% today. The basic theme was to buy what China needs and the met coal from MEE and the recycled steel from CNAM were the just the ideal options. It doesn't hurt that the stocks are down 40-60% from recent highs. Its become evident that China is going to protract any rate hikes due to the issues in Europe and hence the market is likely to flock back into the China theme which means more commodities. More on this subject later.