Monday, October 29, 2007

China Holdings, Inc. (CHHL.OB) up 160%: Have you missed the boat?

Today's penny stock winner is clearly China Holdings, Inc. (CHHL.OB), which went up 160% today ($0.05 open, $0.12 close) after announcing that they have just acquired Tong Kai Yu Minerals Co., Ltd. in China.


What's the deal?

The story is vague; after several conference calls with Pickle Stocks' colleagues on the street, we've determined that the news is harder to decipher than you'd think. Sure, China Holdings did acquire a company with substantial assets, including mineral properties with rare metals such as Vanadium (V2O5), Molybdenum (Mo), and Uranium (U). But to understand what's ahead, we need to dig deeper (pun intended) into the inner workings of mining assets industry.

Mining Assets Industry Basics

Bureaucracy plays a significant role in the mining industries throughout the world. You may say that we're stating the obvious, but maybe not. It is more than possible to determine just how much resource is buried in a given mine. Companies take risks when they know that they're about to make money. So in countries like China, winning the bid is half the work, and that takes a lot of effort, such as schmoozing around the Chinese bureaucracy.

Read the real news.

When you read today's press release, the real news seems to be buried in the labyrinth of acquisition details. Nobody knows whether or not China Holdings paid optimum price for the mine itself (if anybody claims that they know, then they've been to the mine); the next balance sheet will reveal this detail. But something our readers should be interested in is this: three exploration licenses that are part of the deal.

This is what makes a mining company a mining company. This is what enables these stocks to jump 10 fold at a time (we're not saying it will, of course).

Verdict

Should you buy CHHL immediately? As a general rule, when a company gains over a hundred percent in one day, you shouldn't buy the very next morning. Too many people will hear of this stock tonight, and too many people will get greedy tomorrow morning. It is probable that you would see a lot of activities tomorrow morning, and better still, the stock might gain a few percent, but please take Pickle Stocks' advice and wait for the next big wave. If you didn't buy today, then you've probably missed the boat.

Looking ahead

If you plan on buying China Holdings, Inc. as a long-term investment, then you should at least consider buying ten more stocks in the mining assets business. This is a very risky venture with a lot of excitement, and often times, if you succeed 1 out of 10 times, you still win big in the end. Otherwise, don't.

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