WH - Remains My Top Pick

Despite many cautionary red flags and signs that we might be in a beginning of a corrective phase, I believe the next pullback will present a good buying opportunity for stock pickers. This is the time when you can create alpha for your portfolio not by buying or shorting the market, but by finding the gems that will outperform the market both during correction and when the market rebounds. This is not an easy exercise.

One of my top picks and largest holdings is WH, a third largest manufacturer of Oil County Tubular Goods (OCTG) in China. Their products are casing and tubing equipment for oil and gas exploration and extraction industry. This company has a number of things I look for in good investment.

1- It has exposure to energy and is a play on a rebound in oil and gas exploration and extraction.

2- Its a play on one of the best performing emerging economies - China. WH is also a supplier to the state sponsored industry which is in a sweet spot of government's stimulus.

3-It recently adopted a generous dividend policy, a payout between 30%-50% of profits. Just recently it paid $.30/share and declared a special dividend of $.45/share payable to holders as of June 30, 2009.

4- It has a strong cash-rich balance sheet and experienced, investor-friendly management.

5- Valuation is extremely reasonable - trading at a P/E of just 4x 2010 consensus estimate of $1.02. I believe these estimates are conservative, as they proved to in Q1, and will be going up.

This morning they announced Q1 results, beating street estimates by 50%, despite a difficult environment. I remain extremely positive on this company and will keep you posted. The stock has not really participated in the most recent rally in Chinese names, and is up 13% today, but I believe it has more room to run. This remains one of my largest positions.