Tokai Carbon's Melt-Up May Not Be Over

Looking for "pick and shovel" plays, companies that supply and support companies that are seeing significant growth/upturns, is a time-tested strategy that continues to work. That brings me to Tokai Carbon (OTCPK:TKCBY) (5301.T), a company that is a significant player in carbon black, graphite electrodes, and fine carbon, but far from a household name. While the company has a good, and improving, business in its core carbon black operations, a supply squeeze in graphite electrodes that may persist for multiple years is adding sizzle to the story.

These shares have already tripled over the last year, so the eye-popping gains are already off the table. Even so, it looks like there's still double-digit potential left on the basis of continued pricing power in electrodes and improvements in other areas of the business - enough potential, at least, to make the shares worth a closer look.

Investors should note, though, that the ADRs are not especially liquid. In addition, as a Japanese company, foreign exchange risk is a factor that investors have to incorporate into their expectations.

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Tokai Carbon's Melt-Up May Not Be Over