Top 10 Chinese Microcaps

1. China Finance (CHFI.OB Quote) was sold down 50% on record-breaking
volume Monday while I was backing up the truck of bullishness. China
Finance is responsible for helping small-to-medium Chinese enterprises
go public in the United States. What makes this case unusual is China
Finance's assets are highly liquid -- they could be sold in the market
at the current price. Its largest position on Monday, Jade Art, was
unchanged, its second-largest position, Gulf Resources, was up 8.3%,
and its third-largest position, China Organic Agriculture, was up 6.9%
on higher volume. It's not surprising that a company responsible for
taking podunk Chinese companies public struggled through 2008. My
estimates on this stock put it in 100-bagger territory from its 52-
week low of 4 cents. China Finance also helped two of my other picks
-- China 3C Group (CHCG.OB Quote) and Oriental Paper (OPAI.OB Quote).
At 10 cents, China Finance is selling at less than its highly liquid
securities, especially after you take into account their price
appreciations since Dec. 31.

2. Gold Horse International (GHII.OB Quote) ran 44.44% Monday on above
average volume. An Investor Village page was put up over the weekend
and had more than 300 visitors in the first 24 hours. Not bad for a
Chinese wind power play that's profitable and has a P/E under 1 and is
selling at 26% of book value. Its forecast for 2009 is 30% growth.
That was before the company announced it is headed to New York to
raise capital for even more growth.

3. Asia Cork (AKRK.OB Quote) manufactures "green" building materials
in China. I took the liberty of visiting several local flooring places
at Purdue University and confirmed that cork flooring is in high
demand and is durable. Asia Cork is thinly traded at $3.57 million,
but it has a P/E of 1 when it grew last year by 30% and is adding to
production capacity in 2009.

4. Oriental Paper is growing 30% a year by manufacturing and
distributing paper and paper products in China. Jim Cramer recently
indicated that things are looking good in the world of corrugated
paper. This makes Oriental Paper look even better.

5. China Organic Agriculture (CNOA.OB Quote) bought the Bellisimo
Vineyard in California for about $14 million and is trading at $23
million. Compare this to its revenue in 2008 of $112 million. Granted,
the company paid too much for Bellisimo if you are looking at present
discounted cash flows. When you look at the value of a California wine
label in China, where China Organic distributes the stuff, you begin
to see the big picture profit potential.

6. Lotus Pharmaceuticals (LTUS.OB Quote) just ditched its part-time
Chief Financial Officer Adam Wasserman, who still works for Gold
Horse. Management forecasts growth of between 30% to 40% and has so
much in the pipeline and in progress for a $14.1 million company that
it's ridiculous.

7 and 8. Qiao Xing Universal Telephone (XING Quote) is trading at $65
million. Qiao Xing Mobile Communication (QXM Quote) is trading at $140
million. Seeing as how I already like QXM, and how XING owns 70%-plus
of QXM, shouldn't XING be valued at least $100 million?

9. China Energy (CHGY.OB Quote) is enormously undervalued when you
take into account the various reasons it has been unable to produce at
maximum capacity. For example: the expansion of capacity by 60%, the
Olympic Games, and most recently the increase in safety standards. It
produces and processes raw coal for heating and power generation in
Inner Mongolia. My earnings estimates are adjusted to reflect what I'd
consider to be normal operating conditions.

10. China Agri-Business (CHBU.OB Quote) is probably one that I
shouldn't tell you about. I keep buying it at around 21 cents and
selling it at 40 cents on a daily basis. Remember, that secret cash
loop that only exists in video games that you wished existed in real
life? This is it. Right now the entire company is priced at $2.59
million. Its latest reported cash balance is $8.3 million and its
liabilities are $561 million. Yes, it's selling at less than half of
net cash (cash - total liabilities). But now that you know, I can say
bye-bye to my infinite money loop.

11.China Crescent Enterprises, Inc. (CCTR)

12.China Infrastructure Investment Corp (CIIC)

Small Cap:
Chinese Housing (CHLN)
China Direct (CDII)