Glen Doth Know

My thoughts:
We need a bottom in the housing market, and in order to get one, US interest rates must remain low until inflation and foreign investment put a bottom into this market. Inflation will scare away foreign investors, but will help US home owners. Loans being restructured at lower interest rates will help too --- but idiots will restructure with variable interest rates and get squeezed out later down the road or possibly walk if their home is worth less than their mortgage (underwater). This will potentially dry up market liquidity and hurt banks and insurers and all that jazz as well as kill global GDP in the short term. Now that that's how I feel, let's see how the market reacts and react accordingly. China is still the best bet. Commodities already reflect these inflationary tendencies.


“‘Not everything that can be counted counts, and not everything that counts can be counted.’” - Albert Einstein

I wrote all of this the weekend of Sunday, June 7, 2009. I am not publishing it that weekend, but instead possibly mid-week or even later depending on how long it takes me to buy positions in some of the companies below. If you are reading this, it is public. Good luck.

llfh - my current lowball target is 71% price appreciation (and my estimates have a unreasonably strong tendancy to be conservative)
slm - will likely outperform the S&P500 by 100% over the next 12 months (if that's what you're interested in... i'm not, but I still may buy some)
canl - pricey but going to the nasdaq and selling around book value "A conversion to a Nasdaq listing can be completed as early as this summer," Guo said. "We will issue $70 million worth of new shares at that time." - i'm not interested in being diluted. that's like 50% dilution.
ccgy - opportunity knocks only for those who listen. buying opportunity of a lifetime? hint hint, nudge, nudge. I am buying.
wemu - It could triple. They say they have a lot in the pipeline. They say they are moving into the USA and PRC markets. They say they have a monster backlog.Although this would be operating on "he said, she said, the company said" --- the growth they are talking about is over 100%. This company isn't selling less than book value or significantly off its 52-week high. It isn't "cheap" to me. But, I feel that it is cheap to most.In the land of investing, it doesn't matter what the company is actually worth. What matters is how much people are willing to pay for it. Solar right now is hot, and this company is getting listed.They are profitable and have an optimistic outlook. I plan on picking some up casually, but nothing extravagant.
yuii - you will likely make money and beat the market, but i'm not excited about this one
chcg - like it, and this will go up and outperform the market. +300% in the next 3 years is 90% probable
abwtq - abh - haha.. no way
jgbo - an easy double before it gets listed
myst - weak cash flows and i can get better p/s ratios elsewhere. i don't think this is large enough to uplist. but it's definately worth more. cloud computing is an extreme thing. not mediocristian.
siaf - don't mess with pinks
feed - i'd rate around market perform, but it will likely beat the market.
ntes - too expensive, go with sohu instead
hrbn - probable valuation: $18.60
sina - worth more, but too expensive. Sell around a P/E of 40, or around $50 in the next 6 months if it gets there
ltus - love it.
cbak - not interested
cphi - i support this one. lots of upside
txic - looks very interesting, p/E around 4, so upside of around 200% fairly easily. the asian car market is very strong right now
acas - one of my turnaround plays
gls - this is the best airline stock i've found. profitable, i like this one. strong dividend, could shoot 200%.
gnk - my P/E = 4.6, at book value, should be an easy double
cno - like this one a lot.

--------------Note from a fellow Blogger
You should really read some of the articles on www.blogtoamillion.com about CNO.
I have followed your picks a lot, and this stock is one of my favorites - among
ACAS, GLS, and GNK. With 13 cents of Q1 earnings x 4 = 52 cents, or a PE ratio of 5.
..not sure about their insurance reserves (mortgage backed securities, treasuries,
corporate bonds), but they did have writedowns to protect themselves. The upside
here is $10-$15/shr, IMO, but just some disclosure: I am long CNO...
---------------------End Note

Earn a living or earn a fortune. I want to be rich. How do I plan on doing it?
Definitions:
OPM - Other People's Money
OPT - Other People's Time
IQ - My intelligence

I intend to promote my IQ to control OPM to own OPT.

Since I'm lazy, I would rather not reinvent the wheel here. In fact, I don't really want to manage other people or tell them what to do. I'll just stick to evaluating the performance of other people who like to work hard and buy stakes in their hard work when the stakes are cheaper than they should be and capture the value over time.

Now, I'm not claiming to have the best ability to value every company in the world. But, I figure if I focus on not owning anything that seems risky and only recommend the best deals I can find --- that puts me ahead of Wall Street.

Labels: canl, ccgy, cphi, gls, gnk, LTUS, sina, slm, txic, wemu

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