China Health Industries (OTC BB:CHHE)

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Thursday, June 3, 2010

Added to the GeoSpecial list on December 28, 2009 @ 0.55.

Catalyst: Stock was selling at a cheap valuation, given bullish guidance.
Peak performance: Reached a high of $2.00 on January 7, 2010.
Current Price: $0.81

Current road block: No IR; very illiquid; Stock has over 60 million outstanding shares which is above our preferred 50 million maximum threshold; Did not reiterate guidance in its Third quarter 10Q; Company still has not responded to our questions.

Remains on the GeoSpecial list. Previous guidance is still bullish; trailing P/E is 4.04 despite well above average EPS growth rates.

GeoTeam note:

On July 6, 2010 we removed all ChinaHybrids from the GeoBargain/Special lists, pending review.

We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.

GeoTeam® Note:

Please note: On July 6, 2010, the GeoTeam® removed all Chinese stocks that were on GeoBargains and GeoSpecial lists to respective Radar lists as we complete our "quality assessment."

Short term and risk adverse investors should be aware of the quality issues currently present in the ChinaHybrid Space, questioning the validity of what seem like solid fundamental stories. It is beginning to get ugly so be cautious and understand that more pain may have to be endured, as ChinaHybrids are easy prey for short investors. The broad brush that is being applied to theses stocks appears unfair, but we can’t ignore the psychological impact this can have on investors' portfolio decisions. If history is our guide, fear will eventually create an immense opportunity to invest in the companies that prove they can meet quality litmus tests enact shareholder friendly moves. Credibility can also be restored if independent legal/SEC opinions validate accounting practices currently in question.

***Very Important GeoTeam® note. We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.

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