Gianni di Posey is an Analyst at The Mercator, a research firm dedicated to the study of economic and financial market trends.
Posse also writes Benzinga Pro’s exclusive weekly “Insider’s Report” featuring technical analysis, trading ideas and market commentary.
For the week beginning July 4th, Poce is focusing on the following Chinese technical field,
“It’s the relationship in the solar business that we’ve uncovered in the past few weeks. In short, Chinese tech stocks are still trading at cheap valuations despite the recent strength in the Chinese stock market,” writes Posse. He describes the technical area as his big opportunity.
What’s up: Dako’s new energy plant DQ
Dako is a leading producer of high purity polysilicon for the global solar PV industry. Founded in 2008, the company is one of the world’s lowest-cost producers of high-purity polysilicon. Dako’s highly efficient and technologically advanced manufacturing facility in Xinjiang, China currently has an annual polysilicon production capacity of 70,000 tons.
The company grew revenue to $1.2 billion in the most recent quarter and posted net income of $535 million. “Great margin!” Famous pos. Dako is undervalued at 4.5 times earnings versus 16.0 times for the S&P 500.
The company starts a successful year: In 2021, annual revenues and profits increased to US$1.68 billion and US$748.92 million, respectively, compared to US$675.6 million and US$129.19 million in sales and profit just a year earlier.
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why is this happening:Posse says revenue growth coupled with modest valuations is at the heart of his thesis, though he believes all Chinese stocks come with big risks, government intervention and business regulation.
He determined that DACO fits into the solar business theme and that the company would benefit from it. President Joe Biden Customs holiday for two years on imports of solar panels.
“As long as the stock holds above $60.00-$61.00 I am bullish on DQ,” notes Poes, with an upside target of $112.00.
Price promotion: Shares of Dako New Energy closed up 4.12% at $73.83 on Friday.
What’s up: NIO Inc – ADR NEVER
NIO is a Chinese multinational automobile manufacturer headquartered in Shanghai, specializing in the design and development of electric vehicles. The company is known for developing battery swapping stations for its vehicles as an alternative to conventional charging stations.
Poss recalls that NIO was a hugely popular stock with retail investors in 2021, but three-quarters of flat earnings, coupled with a shift in interest, drove the stock down more than 42% over the past nine months.
The company is still losing money annually, he noted — it lost more than $4 billion in 2021 — and shares still trade at valuations that aren’t relatively cheap.
Why does this happen:
The core of the NIO thesis, says Poess, is based on two factors:
Energy returns to Chinese stocks after a significant washout
- A promising technical pattern – Rounding Bottom
- On July 1, NIO reported that June shipments were up 60% year over year. The company is also expected to start deliveries of three new models, the ES6, ES7 and ES8.
“I’m bullish on NIO as long as the stock stays above $19.00-$19.25,” Posse said with an upside target of $36.00.
Price promotion: Nios shares closed at $22.60, up 0.40% on Friday.