Opportunity Calling In China

The ADR Alert
Wednesday, May 31, 2006
By Alexander Green, Investment Director

Email – #113

** Opportunity Calling In China

The recent drop in the Nasdaq and the S&P 500 is tied largely to concerns about whether the Federal Reserve will continue to raise short-term rates.

But when the U.S. sneezes, the rest of the world reaches for Excedrin. Markets worldwide have fallen in sympathy with our domestic market. And, in many cases, they have dropped considerably more.

Emerging markets, for example, have plunged 24% from their peak three weeks ago. So it’s not surprising that we hit our sell stop on China Medical (Nasdaq: CMED) last week.

However, many companies in China cater to domestic demand and their business prospects are completely unaffected by our domestic rate policy. One of those companies is Tom Online (Nasdaq: TOMO).

Tom Online provides wireless Internet services to cell phone users, targeting young and trendy Chinese consumers. Services offered include text and multimedia messaging, music downloads, sports content, and ring tones.

TOM has alliances with China’s two main telecom operators, China Mobile and China Unicom, as well as music labels and media firms. There are also rumors – that TOM will not deny – that it may soon acquire China’s largest Internet portal, Sina (Nasdaq: SINA).

Combined, the new company would be a Chinese Internet giant. But even apart, Tom Online is a promising business.

In the first quarter, revenue surged 38% to $48.5 million. And operating income climbed 32% to $10.65 million.

With China’s middle class growing rapidly – and cell phone ownership ubiquitous – the outlook for Tom Online remains excellent… regardless of our domestic interest-rate policy.

***Action to Take***

Buy Tom Online (Nasdaq: TOMO) at $22 or better. And place a sell stop at $18 for protection. Speculators may want to take a look at the December $25 calls (QWX-LE). But don’t pay more than $2.70.

If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com, or contact Pillar One Advisor Greg Galloway or Rick Pfiefer at 800.438.3040 or 407.667.4729.

Stock & Symbol
Country
Current Price
Comments

Tom Online (Nasdaq: TOMO)
China
NEW
Buy at $22 or better. Place a sell stop at $18.

Aracruz Celulose (NYSE: ARA)
Brazil
$51.40
Buy. Sell stop is $42.

SAP AG (NYSE: SAP)
Germany
$52.65
Buy. Sell stop at $47.

China Medical (Nasdaq: CMED)
China
SELL
Stock hit trailing stop.

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