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January 2007 Pick o' the Month - PacificNet (PACT)

With this month's pick I am continuing a trend of identifying lesser-known stocks that are undergoing a reversal and appear to be moving up.

Stock markets have been red hot in China and India for the past year. This month's pick is a Chinese stock, PacificNet (PACT). The TradeRadar BUY signal was first flashed on 12/19/06 at $5.23. Since then, the stock has seen more good news and has moved up to $6.18 as of the last trading day of 2006. To see this TradeRadar BUY signal, click here. Note that the signal strength is pretty decent and the signal shape is quite well-defined. This leads me to believe we have a real reversal underway and that the newly established trend upward will continue. PACT has exhibited plenty of volatility over the years though so I am sure the path upward will not be smooth.

PACT had recently taken a hit as a result of taking charges for exiting a business segment related to telecommunications. They are continuing with their involvement in providing CRM products and services for large companies doing business in the Asia-Pacific region. They currently have a roster of clients that includes Motorola, Nokia, HSBC, American Express and China Telecom.

More significantly, they are now concentrating on electronic gaming in the region, especially Macau, and have recently landed some contracts from major casinos there. This upswing in business activity is lending credence to the message management gave concerning focusing the company on areas of higher growth. Macau is projected to surpass Las Vegas in total gambling revenue within a year or two and, in anticipation of this, PACT has established an office in Macau which, it appears, is already beginning to yield fruit.

PacificNet employs over 1,400 people in its various subsidiaries throughout China with offices in Hong Kong, Beijing, Shenzhen, Guangzhou, Macau, and branch offices in 28 provinces in China. It is headquartered in Beijing and Hong Kong.

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