Duoyuan Global Water (DGW): If properly managed, will go far

By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month Report

From Cabot Wealth Advisory, 7/27/09  Sign up for free Cabot Wealth Advisory e-newsletter

Today’s stock idea has to do with water. Good old H2O. Water is a daily requirement of all living things, and the earth has a limited supply. So as the world’s population increases, proper management of water resources becomes increasingly critical. And where are both the population and the use of water increasing especially fast? China.

So my idea today is a very young stock, which came public on June 24 and just earned a spot in Cabot Top Ten Report. It’s Duoyuan Global Water (DGW), and here’s what editor Michael Cintolo wrote:

“Duoyuan Water is a leading Chinese manufacturer of water treatment equipment and we feel very comfortable predicting that this company, if properly managed, will go far. And we think it will be properly managed, considering that the company has complied with the ISO9001 Quality Certification since 1996 and the ISO 14001 Environmental Certification since 1999 and also implemented Six Sigma methodologies. The company’s products run the gamut from grit-removing sewage treatment systems to municipal drinking water systems to corrosion-inhibiting processors for industrial use to water purification systems for use by the medical and pharmaceutical industries. In addition, Duoyuan owns and operates a postdoctoral scientific research center, five professional research institutions and several comprehensive R&D laboratories.  It’s the only company in the industry to own a thallophytic laboratory, which boasts the most advanced dynamic simulation laboratory equipment available. Finally, Duoyuan owns dozens of patents with proprietary intellectual property rights in the fields of sludge concentration, sludge dewatering and sludge drying. The company’s revenues grew 55% in 2007 and 49% in 2008, and growth appears to be slowing this year as well, not surprising because of the global economy. But the future is bright, and as this one-month-old stock becomes better known we expect to see institutional sponsorship grow.”

When that was written a week ago, the stock was trading at 27, and we gave the stock a recommended buy range of 25 to 27. It spent the next three days treading water at 27, and then burst out to new highs on Friday, topping 31 before pulling back a bit. So short-term, it’s a bit extended, but long-term it has a bright future. I suggest you watch it a while and try to buy after the next pause or pullback.

Editor’s Note: Cabot Top Ten Report is the #1 source of new stock ideas, like past winners Crocs, First Solar and Apple, just to name a few. Editor Michael Cintolo always has his eye on the market, looking to discover which stocks are going to be the leaders of the new bull market. Every Monday, Mike provides subscribers the market’s 10 hottest stocks, including a detailed fundamental and technical analysis. If you’re ready to discover the strongest stocks in the market today, Cabot Top Ten Report is right for you. Click here to get started today!

Tim LuttsTimothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.