For the majority of last week’s shortened trading, owners of bulletin board stock China Energy Recovery (CGYV) had plenty of reason to be excited - shares rallied from a close of $1.50 before Christmas to a peak of $2.09 by January 2nd. That’s a pretty big move (+39%), particularly when the holidays are inspiring vacation time. By the end of last Friday though, the air had been let out of the bubble… CGYV was back to $1.70, giving up most of the gain.

Nevertheless, the last several days have actually been pivotal - in a bullish way - for China Energy Recovery shareholders.

Despite the late selloff on Friday, the buying volume up until then had been growing quite a bit (by bulletin board stock standards anyway). And, CGYV did manage to hit its second-highest high in months with that peak of $2.09. While it would have been preferable to see CGYV just blast-off and hit $6.00, we have to give the stock a little wiggle room.

As we can see already today, the buyers are coming back to the table for more after Friday’s close at $1.70. China Energy shares are currently priced at $1.75, but traded as high as $1.80 in the earliest part of today’s trading session.

Bottom Line: Slowly but methodically, CGYV appears to be picking up steam. It may not be a bad time to add your first position, or add more to your current position. If this small cap pick blows through the previous high of $2.25 (made on November 17th), we may not see another retest like the one we saw on Friday.

Also, don’t forget we’re looking for revenues somewhere between $22 million and $24 million for their fiscal 2008. Plan on earnings around $1 million. For 2009, sales should be in the $40 million area, and earnings could fall in between $3 million and $4 million. By comparison, the current market cap of roughly $40 million underestimates 2009’s likely results.

Start receiving FREE e-research on select small and micro cap stocks. Get in-depth research reports, comprehensive coverage, exclusive market commentary and more, just by becoming a MCP subscriber today! Look for the submission form at the top of the right-hand column.

Publicity is a funny thing - the more you get, the more you get. Maybe that’s why bulletin board company China Energy Recovery (CGYV) has been everywhere in the media over the last few days… attention gets attention. Here’s a quick breakdown of their most recent media appearances; we’ll end the list with a grand finale that we consider to be a monster-sized achievement… a national television broadcast feature.

If you’re really into alternative energy investing, you’ve probably heard of the site PowerAlternatives.com. Their focal point - obviously - is alternative energy. More important to us, however, is that China Energy board member Roger Ballentine was recently interviewed by the site. This is great exposure to a small-but-active crowd. To replay the interview (it’s in an MP3 format), go to the China Energy page at the Power Alternatives site.

Registration might be required to listen, but don’t worry - we registered and haven’t gotten one solicitation e-mail from them yet.

Speaking of online radio, Ballentine was also recently interviewed by Commodity Watch Radio. You can replay this one as well, as it’s also in an MP3 format. The cool part about the Commodity Watch Radio page where the China Energy interview is accessible is that it also includes an information sheet about the company. You can go to that page just by clicking here. (You may want to just for the info sheet; there are a couple of details in it that we’ve never discussed.)

Commodity Watch Radio has a bigger following than Power Alternatives does. But, both of those online radio outlets pale in comparison to the more recent publicity….

When’s the last time you saw a bulletin board company mentioned on national news TV? Probably never, but your answer is about to change to “just now”.

If you’re a fan of CNN (or the station’s website CNN.com), then you may have already seen the clip. If not, then here’s your chance to see the positive light that CNN put on China Energy’s waste-heat solution. This was the likely reason for yesterday’s pop. However, there should also be an echo-effect of interest. That’s good for shares, as it could draw in more buyers.

Anyway, here’s the China Energy clip from CNN.com. A short commercial plays first, and then the China Energy piece begins.

Needless to say, it hasn’t been a bad week for China Energy or its investors.

Start receiving FREE e-research on select small and micro cap stocks. Get in-depth research reports, comprehensive coverage, exclusive market commentary and more, just by becoming a MCP subscriber today! Look for the submission form at the top of the right-hand column.

Perhaps you came across the news yesterday regarding Japan’s carbon emissions and greenhouse gas production last year? In a nutshell, carbon emissions were up 2.3%…a clear step in the wrong direction of reducing their output of carbon dioxide (CO2). All told, Japan produced 1.37 billion tons worth of CO2, or its equivalent, last year…a record they aren’t exactly proud of.

Japan voluntarily entered the Kyoto pact, which essentially limits the amount of pollution each pact participant is allowed to generate. And, the country’s government thought they could come in under their quota when the pact was first signed. In fact, they were fully expecting a decrease in carbon emissions, which they had managed to do the year before. However, an earthquake led to the shutdown of a key nuclear power plant (TEPCO), so the country fired up their coal power plants. Their CO2 output increased accordingly.

There’s still no word on when or if the nuclear plant will be operational again, so the reprised problem is also an indefinite one.

It’s worth mentioning that - in an effort to abide by the Kyoto pact - Japan is looking to push their carbon output levels to less than 1990’s levels by the end of 2012. That will require almost a 10% reduction of CO2 output every year until then though. So, it’s not unreasonable to think the goal is out of reach, considering the latest batch of data.

What’s this got to do with China Energy Recovery (CGYV)? Nothing, directly. Indirectly it has everything to do with China Energy Recovery.

Considering China Energy Recovery’s (or CER’s) specialty is making coal power cleaner and more efficient, Japan’s solution is a no-brainer… buy some of CER’s caps and boilers. The cost is a pittance compared to the benefit.

One discouraging announcement itself (like this one) doesn’t put money in CER’s pocket. And, just because the solution to the problem is clear doesn’t mean Japan is going to place an order for the equipment that clearly could solve the problem. However, the fact that the problem is so well defined - coupled with the fact that the pressure is on - certainly speaks to the kind of demand CER should enjoy over the next 3 to 5 years. See, Japan is hardly alone here….China’s got a similar challenge, as do many countries including the U.S. (which does not participate in the Kyoto pact).

Carbon emission restrictions are not going away, nor is coal power. One way or another, the world’s got to find a way to make them work together….which is precisely what CER does.

We’re generally not into this kind of ‘concept’ investing, since it doesn’t define a specific valuation. However, CER has provided a clear valuation along with a brilliant product/service concept. That’s why we remain so encouraged.

Start receiving FREE e-research on select small and micro cap stocks. Get in-depth research reports, comprehensive coverage, exclusive market commentary and more, just by becoming a MCP subscriber today! Look for the submission form at the top of the right-hand column.

Recession? What recession? Bulletin board company China Energy Growth (CGYV) has done everything they said they would do since we picked the stock about a month ago. Though the market hasn’t cooperated yet in terms of the stock’s price, the company has certainly done their part.

In the middle of September, China Energy Recovery (CER) publicly said they were on pace to do $16 more million in business by the end of calendar 2008. That would mean total sales of $26 million for the fiscal year….and a 119% improvement on 2007’s total.

Since September, they’ve done nothing but validate their claim. We covered the news of their $3.2 million installation for Two Lions Fine Chemical Co. a couple of weeks ago. More recently, they collected $735K for a system installed at a Chinese paper mill. What was interesting about the paper mill installation, however, was that it not only improved the energy efficiency of the plant, but also prevented a great deal pollution. The system is capable of re-collecting up to 160 tons of the toxic by-product created when making paper. Some of it can be re-used, and the rest of it can be disposed of appropriately. Neither was being done very well before China Energy solved the problem.

The bigger observation is simply that CER is able to adapt their technology to meet a variety of needs. Though our focus (and theirs) has been energy efficiency through waste-heat recovery, there’s no less opportunity in pollution control. Perhaps we’ll be seeing more projects like this in the future, in addition to their heat recovery boiler systems. 

Start receiving FREE e-research on select small and micro cap stocks. Get in-depth research reports, comprehensive coverage, exclusive market commentary and more, just by becoming a MCP subscriber today! Look for the submission form at the top of the right-hand column.

It was only a small mention in a relatively minor article found at MarketWatch.com, but Lily Donge was recently quoted saying she felt that no matter who won the Presidential election this year, a carbon-emissions cap and regulated trading of carbon credits would be introduced when Congress reconvened after the new Commander-in-Chief was in office. (By the way, Donge is the manager of environment and climate change at the ’socially responsible’ investment firm Calvert Group.)

There’s an implication for China Energy Recovery (CGYV) if Donge’s statement was accurate (and we believe it was).

A couple of weeks ago we were explaining how the sale of carbon emission credits was a sub-industry in itself for China’s industries, as the revenue it could generate was significant. China-based CGYV customer Two Lions Fine Chemical Co. sold $2.5 million worth of carbon credits thanks to a waste-heat recovery system that only cost them about $3.0 million…and they’ll be able to sell those credits year in, and year out.

However, that was in China, where a carbon cap system is in place. In the United States there is effectively (and surprisingly) no comparable system… yet. The clamoring for such a framework is growing though, and will likely become law in 2009. When it does, and when trading carbon credits is demonstrated not to be a free-for-all, we absolutely believe U.S. companies will start looking for ways to at least not exceed their carbon-output allotment. Furthermore, we expect these same companies to follow the lead of Two Lions and other factories, and sell their carbon credits for a profit.

Another industry expert quoted in the article specifically said waste-heat recovery was an interesting arena, and would benefit from Congress taking such an action.

The point is, the ideas we’ve been discussing regarding China Energy Recovery aren’t just ours - they’re being batted around more and more each day by the mainstream media. While the stock itself has been a frustration lately, it’s certainly not because the premise is faulty. Indeed, CGYV’s premise is ideal. Now we just need the broad market to cooperate.

Here’e MarketWatch.com’s alternative energy article.

Start receiving FREE e-research on select small and micro cap stocks. Get in-depth research reports, comprehensive coverage, exclusive market commentary and more, just by becoming a MCP subscriber today! Look for the submission form at the top of the right-hand column.