Back in March 2009, if someone had suggested that the Chinese jewelry company Fuqi International (FUQI) was about to embark on a six month run that would blast the stock to a 10x gain, they wouldn’t have found many takers. Seventeen months after its IPO, with three failed attempts to break through resistance at 12, FUQI was a flat-volume casualty trading just above 3.
But by the middle of September 2009, FUQI was just nudging 33 on huge volume. Ten baggers are rare enough, but to get one from a Chinese jewelry company was shocking.
Today’s stock is LJ International (JADE), a smaller company (sales of just $125 million annually, compared with Fuqi’s $467 million). This Hong Kong-based manufacturer of jewelry from gold, platinum and precious stones has been booking some excellent earnings numbers.
LJ’s four most-recent quarters have produced earnings growth of 150%, 50%, 600% and 800%, with after-tax profit margins of 7%, a multi-year high.
Earnings like that will get investors’ attention, and the trailing price-to-earnings ratio of 10 (and forward P/E of 
doesn’t hurt either.
JADE is just organizing a nice breakout above its long-time resistance at 3, while FUQI is completing a monumental flop to 6 having been tainted by some bookkeeping questions.
I like it that JADE is resisting the market’s volatility and inching above long-term resistance.
I don’t like that it’s a very low-priced stock (which will keep many institutional investors from signing on) and that trading volume is low (just 124,000 shares a day, on average).
But the example of Fuqi International gives some credibility to LJ International. The Chinese appetite for gold jewelry continues unabated, and LJ International’s diversified distribution includes fine jewelers, department stores and TV shopping channels.
It will certainly be interesting to keep on your Watch List.
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