Stock Investing Guide

Urbanizing Income in China Gives Us a Quick 17% Gain

Shares of American Oriental Bioengineering Inc (AOB: NASDAQ) are up more than 17% in the past week on news of a strong fourth quarter. The company posted revenue of $96.3 million – a 68% jump – and net income of $21.7 – up 43% on the quarter.

While pharmaceutical companies here in the U.S. are struggling to keep up, AOB is catching fire. This solid growth is what attracted us to the company in the first place. After almost a full 12 months of holding it, we are still impressed every earnings announcement.

The company recently expanded its capacity and product line. It also has ambitions to reach further into the rural Chinese market. As we noted when we first recommended AOB, rural China is the place to be. Our colleague, Chris Mayer, recently found this chart, which sums up our point:



As you can see, China is currently in a heavy period of urbanization. With this many people moving to major cities, average income will rise. When that happens, we’ll see a large increase in discretionary spending, which means more money for supplements and pharmaceutical products.

AOB is, and will continue to be, the country’s leading pharmaceutical provider as long as they reach as many customers in rural areas now. If they can do that, these customers will stay loyal when they move to the cities and have larger incomes.

We are already seeing this take place, and should continue to see results like these for a while. If you haven’t already, we recommend you buy shares of AOB.

Action to take: Shares of American Oriental Bioengineering Inc (AOB: NASDAQ) remain a buy at current prices.

Finally, a Bull Indicator For Our Silver Play

We just got word that for the first time in many months, the short interest in Coeur d’Alene Mines Corp (CDE:NYSE) is down. That means, the number of people now shorting – or betting on it to fall – is 18% lower than it was two weeks ago.

One of the common complaints on Wall Street last year was the amount of people shorting the banks. Many of those companies blamed the shorters for causing a panic and depressing share prices. We found out they were wrong in that case, but they still have a point: shorting can depress share prices.

This is one of the reasons our shares of Coeur have fallen in value. There’s been a massive short interest since we bought in 2007. These shorts are now finally leaving this trade. They’ve done well over the past year, but now it’s our turn.

Coeur, as we’ve said, is about to start production at its Palmarejo mine this month. You’ll want to be on board when that happens.

Action to take: Shares of Coeur d’Alene Mines Corp (CDE:NYSE) remain a buy at current prices.