So, taking off from the concept that I wrote about yesterday, that the next high-potential stocks will be companies that were previously unknown and unloved, here’s today’s investment idea.

It’s China Sky One Medical, a developer of over-the-counter nutritional supplements and traditional Chinese remedies and medicines.  In 2005, revenues were $7.7 million, in 2006, they hit $20 million, and in 2008 they swelled to $49 million!  In the most recent quarter, revenues grew 77% to $29.7 million, while earnings grew 36% to $0.60 per share.

Here’s what editor Paul Goodwin wrote in Cabot China & Emerging Markets Report back on December 11.

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“China Sky One Medical (CSKI) has grown its sales 158% and 148% in the last two years with a huge product line that includes items like weight-loss patches, wart removers, hemorrhoid ointments and dandruff shampoos.  A quarter of the company’s sales come from outside China, which is a good connection for any Chinese retailer.

“CSKI has been public just since May, and it has been through a decline from its post-IPO high of 17 to an October low of 6, before recovering strongly on good volume to 13.  The stock’s average trading volume is just 53,000 shares a day, which is way too low to ensure liquidity.  But with a P/E of 8 and strong sales and earnings numbers (including an after-tax profit margin of 33.5%), along with a strong chart, it’s one to keep an eye on.  Which is exactly what we’ll do.  WATCH.”

Since then, trading volume has grown, and now averages 115,000 shares a day-still light, but moving in the right direction.  And the stock’s action is encouraging.

Last week, in fact, Paul wrote, “The chart for CSKI shows a stock that is trading sideways in a tight range between 14 and 15.  This is exactly the kind of launching pad we like to see, as a tightening chart on declining volume often precedes a big move.  The stock made just such a move after spending seven days above resistance at 12 in late January.  Continue to watch CSKI.”

Editor’s Note: Cabot China & Emerging Markets Report was the #1 newsletter for 2006 and 2007 with gains of 78.6% and 74.1% respectively, according to Hulbert Financial Digest. The Report remained the top-rated newsletter throughout much of 2008, despite the market’s crash. Editor Paul Goodwin applies Cabot’s time-tested growth stock investing system to the emerging markets to tell you when it’s time to buy and when it’s not. Right now, Paul is discovering the top stocks in the emerging markets, many of which will likely lead the new bull market higher. Don’t let the opportunities in the emerging markets pass you by, click here to find out more today.