With several Japanese auto manufacturers weakened by climatic events, Ford Motors (NYSE: F) may have got the break it badly needed. Both Honda and Toyota motors have been weakened from the destruction overseas. Coincidentally, Ford and General Motors have seen some buying activity on speculation of increased market share. The chart clearly shows an upsloping support line providing support to the stock. We used the latest test of this line as a buying opportunity.

Ford Motors (F) is testing 2-year support after making a recent high around $19.00 during earnings season. Since its high the stock has been hammered on concerns of slowing growth in Chinese markets and stagnant US markets. Today’s candle and low at $13.85 represents a key support level as shown on the chart above.

China Agritech (CAGC) is a manufacturer of liquid fertilizers in the People’s Republic of China. The company has come under scrutiny in recent trading for securities fraud allegations regarding the size and scope of its business. As a result the stock has been under pressure as numurous law firms have filed lawsuits. Short sellers have taken hold of the company, sending shares down from their peak of $30.75 to just $7.44 per share in recent trading.

The collapse in share price came swiftly after LM Research provided a $2.00 price target and detailed analysis of the ongoing fraud. Management responded with defending arguments to no avail, as shares popped 7% only to fall soon after. If management is so sure business is sound and honest, why aren’t they loading up with insider purchases at these depressed levels?

China Agritech caught our attention after breaking down from an $11.00 support level that had held since May of 2010. Charts like that of CAGC are a short sellers dream. Christmas tree shaped patterns with massive breakdown on high volume indicate serious underlying problems. As the massive fraud and misrepresentation is uncovered by law firms we expect shares to drop even further. Our price target of $3.50-$5.00 represents a steep decline (35%) from already depressed levels.

McDonald’s Corp (NYSE: MCD) is the worlds largest restaurant chain employing more than 1.5 million people in 119 countries. Of their total 31,000 restaurants worldwide, just 1,200 are located in China, with only 175 open in India. With such a small presence in these two key markets, McDonald’s will look to aggressively expand operations in the next few years.

The company has increased shareholder dividends for 25 consecutive years, making it one of the S&P 500 Dividend Aristocrats. McDonald’s provides investors with a steady dividend (3.20% Yield), while still providing quality growth overseas. If you conservatively project expansion in these two countries based on US population and size the story is exciting. The United States has 300 million people and 14,000 restaurants. Together, China and Japan have 2.5 billion people with just 2,300 stores collectively. This disparity highlights the potential for expansion  in these key markets.

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Betting on Huge Growth from China to Reward Shareholders

Yum! Brands (NYSE: YUM ) operates well known fast food restaurant chains like Pizza Hut, KFC and Taco Bell. Collectively, the company has 36,000 restaurants in 110 countries. Despite having more overall units, Yum! Brands (22.5 Billion) has just 25% of the market cap McDonald’s (81-billion) has. Yum! is looking to even the score with its strong foothold in China and India.

The company has 3,500 restaurants already open in China, with just 100 units in India. Yum! Brands also forecasts an ultimate saturated restaurant goal of 20,000 stores in China alone – 600% growth on top of a 2.10% dividend!  It is important to note these emerging markets might not currently have the culture or disposable income to match the United States. However, with growth of the middle class and native currency appreciation it is our belief that fast food will be widely adopted into foreign cultures.

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Globalization and the expansion of the middle class in emerging markets will provide profit growth for each company. Other players in the market like Burger King (NYSE: BKC ) and Wendy’s Group (NYSE: WEN ) are largely irrelevant. Burger King was recently taken private again, while Wendy’s has negligible operations in these key markets. However, Wendy’s could soon follow in the footsteps of Burger King fielding private offers. Over the past 6-months takeover and buyout talks have been looming. In any case, consolidation and international growth should dominate headlines for the fast food restaurant business. McDonald’s and Yum! Brands will emerge as winners, while other companies struggle to find relevancy.

Disclosure: Author is long McDonald’s (MCD) and Yum! Brands (YUM) at the time of publication.


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Canadian Based Company with  Huge Gold Reserves

NovaGold Resources Inc (AMEX:NG, Free Analysis!), a Canadian based minerals and exploration company may not have notable production, but it holds one of the world’s largest unhedged gold reserves. While the company came under fire in late 2008 for delaying mining infrastructure plans, its assets have made a dramatic increase in value. NovaGold owns 50% interest in two of the worlds largest underdeveloped copper-gold properties. With proven reserves of over 17 million ounces of gold and another 12.5 million ounces of measured and inferred reserves, the company is extremely levered to the price of gold.

With precious metals reserves increasing so quickly, the company could once again attract several suitors. Barrick Gold made an offer in 2007 and was quickly rejected, undervaluing NovaGold’s massive unhedged reserves. This time around things could be different. Gold mining companies could finally step up to the plate with reasonable offers in effort to replenish depleting reserves. In any case, Novagold is said to have plans in the works to begin infrastructure build out at Galore Creek. The transition from a exploration and development company to a gold producing company could be extremely profitable for investors. Paulson & Co. and Soros Fund Management have taken large stakes in the company, collectively amounting to greater than 15% of the total shares outstanding. In a recent announcement, Paulson & Co has filed a 13D with the SEC declaring a  9.10% stake.

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Small Silver Producer with Projects in China

Silvercorp Metals Inc, (NYSE:SVM, Free Analysis!) explores and developes mining properties in Canada and China. The company has several projects focused on silver, lead, and zinc mines in the Ying Project, the HPG Project, the TLP Project  and the LM Project in China. It also has interests in the Silvertip project in northern British Columbia, Canada. A well financed company with over 75$ million in cash equivalents, Silvercorp should be able to expand and grows reserves going forward.

The company is particularly attractive based on its foreign asset reserves, particularly in China where it produced better than 4.5 million ounces of silver. Inflation coupled with a rise in industrial demand for precious metals should send this stock higher. Silvercorp Metals also pays a small but significant dividend of 1% for long term investors. With silver making huge moves higher it would not be unreasonable to see dividend hikes in the future. Asian countries have seen tremendous growth GDP figures. These gains could not have been possible without large quantities of industrial metals for infrastructure build out, automobile manufacturing and electronics production.

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Small  Producer with Silver Assets in Mexico

Endeavor Silver Corp, (NYSE:EXK, Free Analysis!) is a Canadian based mining company with large silver mining assets in Mexico. Known as the world’s top producer of silver, Mexico has political stability and a favorable tax structure. Because of its history as a world leading silver producer, the country has developed a skilled work force and strong commitment to natural resource development.

The company is well on its way to becoming a premier mid-tier silver producer. After a 10% increase in year-over-year production in 2009, Endeavor forecasts a 20% gain in 2010. Enjoying multi-year high gold and silver prices, the company has increased margins while reducing cash costs. Looking to acquire and buyout smaller mining companies in effort to grow reserves, Endeavor recently made an all cash offer for Canadian based Cream Minerals.

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Disclosure: Author is long all of the stocks mentioned in this article at the time of publication.


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