Borislav Tonev

Great China International Holdings, Inc. (OTCMKTS:GCIH) Receives A Free Promotion

by Borislav Tonev August 26, 2013
GCIH.pngGreat China International Holdings, Inc. (OTCMKTS:GCIH, GCIH message board) opened Friday's session at $0.30, skyrocketed to a high of $1.25 after which it calmed down a bit. When the closing bell rang, the ticker was standing at $0.78 and this means that if you are lucky enough to have some GCIH stock bought at the previous value of $0.07 per share, you are looking at potential gains of around 1,000%. Indeed, these figures will probably put a smile on the face of even the most skeptical investor, but we were interested in finding out what propelled the ticker to such heights.

In most cases, impressive single-day gains such as this one are either caused by some exciting piece of news, or by a promotional effort from the newsletters and if you check out GCIH's Yahoo! Finance profile, you'll see that there hasn't been a new press release for quite a while. Things look a bit more interesting at our database.

Just minutes after the start of Friday's session, ResearchOTC, MomentumOTC, Stock Rock and Roll, Stock Mister and PennyStockLocks alerted everyone how great an investment GCIH could turn out to be. The peculiar thing is, none of the newsletters disclosed any sort of compensation and that leads us to believe that they did the whole campaign in an effort to improve their track records a bit. So far it seems to be working, but most of the people are probably trying to find out if GCIH can withstand the test of time and maintain any sort of consistent stock performance at this sort of values.

Looking at the historical prices won't help at all. Before the newsletters came in, trading was virtually non-existent which means that right now, predicting the future is extremely difficult. On the bright side, GCIH doesn't appear to be the typical penny stock venture with an ambitious business plan and no way of setting it in motion.

They are actually a real estate enterprise and according to their latest quarterly report, they have been in the business for decades, they have generated revenues and they have cash reserves that most of the small cap enterprises can only dream of. Here's a summary of the most important figures as found in GCIH's 10-Q covering the three months that ended on June 30:

  • cash: $6.5 million
  • current assets: $13.4 million
  • current liabilities: $34.9 million
  • quarterly revenues: $2.3 million
  • quarterly net income: $42 thousand

It's pretty clear that it's not all good news. Indeed, they are unlikely to overdraft their bank account any time soon, and they have managed to generate a small profit during the reviewed quarter, but the working capital deficit of around $21 million is definitely a cause for concern. In addition to this, the fact that, as of the time of writing this article, GCIH's website seems to be down could also be a bit irritating for the regular investor who is interested in the stock.

7ANSU.pngOur biggest worry at the moment, however, is the promotional effort. In a normal situation, the evidence of progress towards profitability should act as a prerequisite for a more consistent stock performance, but when the pumpers are around to artificially inflate the price, sudden corrections are always a very real danger. Amanasu Techno Holdings Corp (OTCMKTS:ANSU)'s chart is on hand to give you a picture of what we mean. Just like GCIH, trading for ANSU was pretty uneventful before the promoters came along and the campaign was once again done for free which would suggest that the pumpers were trying to boost their credibility with the addition of an impressive performer to their track records. Unfortunately, however, the pressure proved too much for ANSU and the peak turned out to be quite short-lived which means that some of the people who bought in while the hype was still on are now looking at losses of around 78%.

Is a similar crash in store for GCIH? The next few sessions will give us a definitive answer to this question, but as of right now, there's nothing to suggest that the ticker is immune to falling down like a rock. That's why, considering all the risks carefully is absolutely crucial before making your final decision.

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