For my investment idea today, I’ve deliberately headed toward the low end of the price scale.  Xinhua Sports and Entertainment Limited (XSEL) is so low-priced (less than 2) and trades such low-volume (it averages less than 200,000 shares traded per day) that it’s too volatile for even an aggressive growth advisory like Cabot China & Emerging Markets Report.

But the company’s strategy is innovative–it has developed an integrated platform of advertising resources that includes TV, Internet, cell phone, radio, newspapers, magazines, university campuses and other outlets.  The company’s broadcast arm sells advertising and produces content for radio and TV.  The print division owns advertising rights for two Chinese magazines and one newspaper. And the advertising plans, creates and places ads on Web sites, on TV, in print, on radio and on campus billboards and outdoor media.  It controls the rights to the All Sports Network in China, produces a reality TV show called The Scene, which looks at ordinary urban Chinese, and produces the Fortune China financial TV shows.

It’s hard to say just how solid this company is.  It was incorporated in November 2005, and management has negotiated some valuable placement rights and secured the rights to some desirable content.  Earnings have been positive since 2005, although year-over-year results have been in decline.

The big draw for XSEL is its chart, which shows a stock that dipped as low as 22 cents a share last March, but had been steadily improving until July 27, when it took off like a rocket, gaining nearly 32% in one day.  Since then, the stock has continued to soar on elevated volume, and is rapidly closing in on 2.

XSEL traded at 13 when it came public in March 2007, but started declining almost immediately until it plunged deep into penny stock territory in March of this year.

I don’t really recommend buying XSEL.  It’s too much of a mayfly to risk your hard-earnings money on.  This enviable eight-bagger advance can make your mouth water, but except for the announcement of the company’s earnings report date and PR Newswire fluff, there have been no news stories on the company in months.  But it’s a fascinating story and the P/E of 7 is admirable.

The company’s Q2 earnings will be announced on today at 8 p.m.  Then we’ll see what happens.