Glen Doth Know

Tommy,

Glad someone looks through my notes. I just added this to my to-do list --- which is currently 7 companies long.

My dad ran a business called ARM Computing for 15 years. I am just carrying on the legacy.

A couple things:

1. Your notes reflect that you dig deep enough and that you have a sense of what you are looking for. That's a plus.
2. If I had any advice, or a cautionary statement --- make sure you never get caught up in 1 company and try to continue to prove that it is a good value. Always be nimble and always be comparing that which you are invested in to that which you could be invested in. If you like another opportunity better. Switch.

A couple similar companies off the top of my head that you might be interested in/familiar with

oil
Cneh, lpih, I think snen too. (snen is not a buy for me, but it's interesting)

Coal:

Sclx, chgy, pudc

Anyway, I'm sure there are more. The bottom line: Find the best way to allocate your money so that you are the most confident that you will not lose. I can't emphasize that enough. By doing that, with that mindset, you should do fine. The trick is figuring out what not to own instead of wasting lots of time evaluating 1 single potential opportunity. I call this relative valuation.

Maybe I have no idea what I'm talking about, but empirical evidence suggests otherwise,

Glen

-----Original Message-----
From: Tommy Gallagher [mailto:thomasmgal
Sent: Monday, June 01, 2009 9:51 PM
To: Bradford, Glen Richard
Subject: Re: CCGY

Hey Glen - congrats on getting the hedge fund started up. I wish you
luck. Does the ARM name have any significance? How'd you come up with
it?

A stock I came across tonight is CCGY - China Clean energy. Looks
like it may have bottomed in early March at .10 cents. With the
increase in diesel margins today of 8% and their new facility coming
online in September - this may be decent bargain. Their earnings
weren't impressive for last year or the first quarter. I didn't see
this in any of your round robins and was wondering if you've looked
into this stock at all. At 20 cents its pretty inviting. they were
initially on the docket to present at the china rising conference, but
they didn't. I'm not sure why Glass half empty - i should stay away,
there is a bad reason why they didn't present, couldnt get their act
together, were disinvited etc...glass half full - too much going on
with the economy, not enough time, another, some other benign reason
and now not everybody knows about this stock yet since it didn't
present and its an opportunity.

looks like it is getting some notice with 175k volume today.

Below is the link to the china conference website showing they were
originally scheduled to present and a piece of their quarter
filing...let me know what you think.

Thanks,

Tommy


http://www.chinarisingconference.com/news/news20090416.html

Labels: ccgy, CHGY, CNEH, lpih, PUDC, sclx

Anthracite Capital is Reinflating
By
Glen Bradford
Instead of talking about finance institutions that are being diluted like Citigroup (C) and financial institutions that are so hot they’re already above their November lows like Wells Fargo (WFC) and Goldman Sachs (GS), I’m going to introduce you to a better place where it’s bottoms up from here.
After getting the wind knocked out of it, Anthracite Capital shows signs of life. Granted that the price has probably exploded higher from $0.74 by the time this article gets published, let us use it at a baseline. What do we know about Anthracite at $0.74?
1. Anthracite is trading at a P/E of 0.487 if you knock out the Q4 2008 earnings nightmare and look back 1 year from Q3. The reason I took out Q4 is because the loss claimed appears to be a one-time huge write off, followed by positive earnings the next quarter.
2. Anthracite Capital is trading at a book value of 0.1.
3. Anthracite Capital is traded on the New York Stock Exchange. Let me repeat. This is a company cheaper than the listing requirements on the New York Stock Exchange. It either increases in price or eventually gets delisted.
All of these figures indicate that Anthracite is priced for bankruptcy. Where’s the good news?
1. They have pushed back the disaster twice already and have been in talks to resolve the issue. If I know anything about creditors, the last thing they want to do is run their debtors into the ground.
2. Anthracite was profitable in Q1 2009, just not as profitable as it used to be. If you optimistically flat line the profit figures from Q1 2009 into the future, your P/E is still 0.685. Note that Q1 of 2008’s Net Income Applicable to Common Shareholders is twice as large of that of any quarter as far back as I can see. So, comparing Q1 2009 to Q1 2008 isn’t fair to begin with. The bottom line here is that comparing the income of Q1 2009 to Anthracite’s history --- things match up but the revenues are weaker.
So, what am I doing about it? I’m buying. I probably already have a sizeable position. I’d say you could add this to my suggestions for 100% in 1 month, but that would be an understatement. I’d be surprised if AHR didn’t see $2 by June 18th.
Disclosure: Glen and his investors own AHR.


Title ideas: China: Harder, Better, Faster, Smaller
China: Go Small Or Go Home
By
Glen Bradford
Cramer’s a buyer of Bucyrus. I’ve been a fan of Bucyrus since I came across it in late August 2008. Back then, I grabbed the coattails of the top of the roller coaster and rode it down from $67 to $62. If I liked it then, imagine how much I like it now at $23, on its way back up. Up over 100% from its low, why is this growing company trading so cheaply with a P/E of 6.86? I’ve got one idea. Opportunity cost. If you want to play china the right way right now, you have to start small and work your way up to see the big picture.
Bucyrus makes the mining equipment. Let’s take a look at some folks that may use this kind of equipment and are trading at a discount to Bucyrus. To set the stage, Bucyrus has a P/E of 6.8 and is selling at 1.7x Book Value. Let’s look at some undervalued Oil and Coal ideas that are all less than half as expensive as Bucyrus with respect to both metrics.
1. Puda Coal (PUDC) is being featured at the China Rising Investment Conference today and is set to run from 10:00-10:30am. Puda Coal is a supplier of metallurgical coking coal to the industrial sector in the PRC. They are currently in the process of vertically integrating their supply chain. Goldman Sachs just upgraded the entire coal industry. The reason for upgrading the industry is mostly due to China. Looking at these numbers, I’m going to agree with Goldman.
2. Longwei Petroleum Investment Holdings (LPIH) is one of the leading diesel, gasoline, fuel oil and solvent oil distributors/wholesalers in Taiyuan City, Shanxi Province, P.R. China. Do note that they’re expansion is being financed through their working capital. Bank loans in China have been unbearably tough to get this last year --- so this is a strong point.
3. China North East Petroleum (CNEH) is engaged in the exploration and production of crude oil in Northern China. They just signed a contract to drill another 48 wells in the next 10 months, taking their total to 303 after the project is completed. Crunch the numbers and that’s 18% growth in production in 10 months.
4. Now, I would outline the advantages of China Energy (CHGY), but I did that 2 weeks ago. Instead I’ll give you a bonus pick that’s American. Crimson Exploration (CXPO) is even less than half of half as expensive by both metrics as Bucyrus. They are an independent natural gas and crude oil company engaged primarily in the United States, Gulf Coast and South Texas regions.
Now, I’m not telling you that you’re not likely to make a lot of money on Bucyrus right now. What I’m saying is that if you have two opportunities, and one of them is more likely to return more money than the other --- it would make sense to buy into the one with better returns, right? That said, Bucyrus in my opinion is definitely worth more in the long run. It’s trading less than its backlog and that’s pretty much sinful.
Disclaimer: Glen and his investors own LPIH, PUDC, CNEH, CHGY, CXPO.

Labels: ahr, C, CHGY, CNEH, cxpo, lpih, PUDC

10 Best Chinese Microcaps
By Glen Bradford

Hi, I’m Glen Bradford. I was only trading my college tuition. As of today I am also trading my roommate’s college tuition. I wrote for TheStreet.com last fall and undertook equivalently 25 Credit Hours of MBA courses at Purdue University. I’m currently in the top 1% of Motley Fool CAPS players. For those of you that want to join me and make something out of nothing, I’m going to introduce you to the most ridiculously undervalued Chinese Companies on the face of the planet.

The requirements for these companies:

1. High Growth.
2. Profitable.
3. Selling less than Book Value.
4. Cheap based on Earnings (incl. Positive Cash Flow From Operations).

I’ll start with the top and work down. The Target value is a calculation composed of 3 parts: 1/3 Book Value + 1/3 P/E of 8 + 1/3 P/E of Growth. I have adjusted some of these numbers to remove 1-time expenditures, the potential of share dilution, intangible equity, etc. To be honest, all of these stocks should trade much higher than their target. This just helps me price companies in the midst of a crisis.



1. China Finance (CHFI) was sold down 50% on record breaking volume Monday while I was backing up the truck of bullishness. China Finance is responsible for helping small to medium Chinese enterprises go public in the United States. What makes this case unusual is China Finance’s assets are highly liquid --- they could sell them in the market at the current price. Monday, their largest position Jade Art was unchanged, 2nd largest position Gulf Resources was up 8.3%, 3rd largest China Organic Agriculture (also covered in this article) was up 6.9% on higher volume. It’s not surprising that a company responsible for taking podunk Chinese companies public struggled through 2008. My estimates on this stock put it in 100-bagger territory from its 52-week low of $0.04. China Finance also helped two other of my picks --- China 3C Group (CHCG) and Oriental Paper (OPAI). At $0.10, China Finance is selling at less than it’s highly liquid securities, especially after you take into account their price appreciations since December 31, 2008.

2. Gold Horse International (GHII) ran 44.44% Monday on above average volume. An Investor Village page was put up this weekend and had over 300 visitors in the first 24 hours. Not bad for a Chinese Wind Power play that’s profitable and has a P/E under 1 and is selling at 26% of Book Value. Their forecast for 2009 is 30% growth. That was before they announced they are headed to NYC to raise capital for even more growth!

3. Asia Cork (AKRK) manufactures “green” building materials in China. I took the liberty of visiting several local flooring places here at Purdue and confirmed that Cork Flooring is in high demand and is durable. Asia Cork is thinly traded at $3.57M, but at a P/E of 1 when it grew last year by 30% and is adding to production capacity leading into 2009.

4. Oriental Paper (OPAI), as mentioned earlier under China Finance, is growing 30% a year by manufacturing and distributing paper and paper products in China. Cramer recently indicated that things are looking good in the world of Corrugated Paper. This makes Oriental Paper is look even better.

5. China Organic Agriculture (CNOA) bought the Bellisimo Vineyard in California for about $14M and is trading at $23M. Compare this to their revenues in 2008 at $112M. Granted, they paid to much for Bellismo if you are looking at present discounted cash flows. When you look at the value of a California Wine label in China where China Organic distributes the stuff, you begin to see the big picture profit potential.

6. Lotus Pharmaceuticals (LTUS) just ditched their part time CFO Adam Wasserman (who still works for Gold Horse). Management forecasts growth between 30% to 40% and has so much in the pipeline and in progress for a $14.1M company that it’s ridiculous.

7, 8. Qiao Xing Universal Telephone (XING) is trading at $65M. Qiao Xing Mobile Communication (QXM) is trading at $140M. Seeing as how I already like QXM, and how XING owns 70%+ of QXM, shouldn’t XING be valued at least at $100M?
7.
8.
9. China Energy Corp (CHGY) is enormously undervalued when you take into account the various reasons they have been unable to produce at maximum capacity, for example --- the expansion of capacity by 60%, the Olympic Games, and most recently the increase in safety standards. They produce and process raw coal for heating and power generation in Inner Mongolia. My earnings estimates are adjusted to reflect what I’d consider to be normal operating conditions.

10. China Agri-Business (CHBU) is probably one that I shouldn’t tell you about. I keep buying it at around $0.21 and selling at $0.40 (on a daily basis). Remember, that secret cash loop that only exists in video games that you wished existed in real life? This is it. Right now the entire company is priced at $2.59M. Their latest reported cash balance is $8.3M and their liabilities are $561M. Yes --- they are selling at less than half of net cash (cash – total liabilities). But, now that you know I can say bye-bye to my infinite money loop.

I’m the kind of guy that questions everything and is willing to take a stand until empirically proven otherwise. So far, my allocation decisions empirically prove that I know what I’m doing --- so much for that efficient market hypothesis.

Disclosure: Glen and his investors own chfi, ghii, akrk, opai, cnoa, ltus, xing, chgy, qxm (through xing), chbu, chcg.

Labels: AKRK, chbu, CHCG, CHFI, CHGY, CNOA, GHII, LTUS, OPAI, QXM, XING

China MicroCRAPS? - The Inefficient Market Hypothesis
By
Glen Bradford

The Inefficient Market Hypothesis.
After sitting through my first year of MBA coursework and having the EMF crammed down my throat like trying to eat a spoonful of cinnamon, my gastrointestinal reflexes have had enough. Wikipedia puts it best: “The efficient-market hypothesis (EMF) states that it is impossible to consistently outperform the market by using any information that the market already knows, except through luck. …Empirical analyses have consistently found problems with the efficient markets hypothesis, the most consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or book value) outperform other stocks.”

I’m the guy that sat through upper level psychology courses and disproved a significant quantity of their best-practices by showing that indeed their preferred treatments were statistically insignificant from the placebo. You may think I’m nuts, suspicion always was the signature of incompetence. There has always been room for these type of tipping-point broad-scale logical conundrums. For example, the world used to be flat. Even when proven otherwise, it took years to get to a spherical world.

Empirically disproving a hypothesis normally pushes them into oblivion, but the EMF is one that has been chosen for mindless perpetuation throughout MBA schools across the United States, as evidenced by my curriculum questioning at various MBA Case Competitions.

If you want it… Go get it. Period.

1. Figure out what works
I started with the most successful investor and worked backwords. An overview of what ideas I’ve traversed across can be found here http://web.ics.purdue.edu/~gbradfor/glen/files/Stocks/Abstract.doc . I would like to add that this works in every market and that I believe that every market average can be beaten through due diligence. Do note that settling for average shouldn’t always be frowned upon as it may be satisficing.

2. Do it
Find people that are doing what you want to be doing and start imitating. This is where most people go wrong and lose scope of the fact that if compounding interest isn’t working for them or they don’t know what it is --- it is most surely working against them. If it’s not working, you might be doing it wrong.

3. Kaizen
The goal here is to continuously redefine your decision making structure in order to continuously improve your definition of what works to align with what actually happens.

3 New Chinese Microcap Picks as Potential Empirical Evidence Against The EMH

1. Sell less than Cash – Total Liabilities
China Agri-Business (CHBU) is currently selling for less than net cash, is making money, and is growing. It’s really tough to complain about this kind of opportunity. That said, my mom is selling this company because I’ve made her a lot of money on it. I personally think that’s bad logic --- because I’d rather sell it at Cash-Total Liabilities

2. Sell off on “Bad” News
China Energy Corp (CHGY) is down over 50% from where we were a week or so ago. This bad news is that they closed down to increase the safety of operations. In my opinion, the long-term good news is significantly overpowering the bad news --- especially at this bargain bin price. I have its earnings pegged at $0.15 a share and huge catalysts on the horizon that are simply not priced into the company’s market cap. In fact, I think we are priced to go under.

3. Sell less than what you’ll make the rest of this year.
Oriental Paper Inc (OPAI) has taken a beating even though it’s making more money than it’s going to make for the rest of this year ignoring that it made money this first quarter.


That wasn’t so bad.
Not everything is worth knowing. The person speaking the loudest may have the least to say. Optimistically bounding uncertainty drives aggressive ignorance and the market boom/bust cycle. High power defective reasoning will continue to come from empty suits. Short-sightedness will always weigh in on long-term decisions. The point is this: blindly accepting what other people tell you works to their advantage and not yours. You will only get ahead by being better than average. To be better than average, you must do something different. Keep in mind that this isn’t for everyone. The first step to getting what you want is determining exactly what it is that you want.

I’m the kind of guy that questions everything and is willing to take a stand until empirically proven otherwise. I’m not a scientist --- I’m an engineer. I am not interested in learning how things work except for knowing the best way to make them work advantageously. No matter how seemingly self-evident something may be, people still may not understand. Never underestimate the predictability of stupidity.

Labels: chbu, CHGY, OPAI

Timothy Sykes says dump this cause it's been hyped.

A few statements I've Found:
"My firm Lebed Biz LLC has been compensated by a third-party (Maxim Capital) $20,000 cash for a one-month CHGY investor relations contract. "

"Momo Plays - Momoplays.com has been compensated by a third party the sum of 2500 dollars for a three day awareness campaign for chgy"

I don't really care about who likes what and all that valley girl jargon. I care about facts. Fact is, companies could be lying to me. That said, I'll take a walk on the wild side and list a few reasons why I like CHGY.

1. I went quarter by quarter through 2008 and saw that the sale prices were higher than 2007, but CHGY was unable to attack a these higher prices due to expansion and the olympics.

The olympics look to me to have killed $2M of revenue from the Heat Power, not to mention that their 2007 heat power numbers were hurt because of inefficiencies as 2007 was their first year of operation.

Then the whole expansion thing, what you have is CHGY holding onto it's Annual revenues because the price of coal is going bonkers.
http://indexmundi.com/commodities/?commodity=coal-australian&months=60

So, then you check the numbers.

Year Annual Production Per ton Weighted Average Price
2004 506,913 $ 10
2005 612,739 $ 24
2006 549,970 $ 24
2007 459,055 $ 25
2008 264,098 $ 58

So, you can confirm that either the company is full of SHIT, or that they actually were expanding and cutting production in 2008. Good news, the new capacity is supposedly 800,000; even though they were talking 1,200,000; and some stock blogger people are chanting 900,000,000
http://theperfectstock.blogspot.com/

So, what has happened in the stock price? http://stockcharts.com/h-sc/ui?s=chgy&p=D&yr=0&mn=9&dy=0&id=p04446711432

CRAP. I missed out on $0.06-$0.30

That's a MONSTER GAIN! What could possibly be left in this stock? After all, Tim Sykes said it was bad.

Well, this year they increased their EPS and had little to negative impact on their top line Revenues.

With the whole 60% growth in coal mining and the non-occurance of the olympics, $30M in revenues is not out of the question with a coal price of $27. But basically, if they actually expanded, I see no way that they could possibly not have Year-over-Year double digit growth unless prices get trampled. I am a believer in China's need for energy. I'll take it. And no, nobody gave me any money to write this; but if they decide to give me money --- I'll let you know.

Labels: CHGY