Glen Doth Know

gmcr, cbou, ddrx --- i dunno. i had a list somewhere of the overpriced coffee stocks. i'm just saying like in Disney's movie Jungle 2 Jungle. Get out of Coffee.
cphi - still like it
chbp - scared, not always profitable
skbi/skbo - will look again later during when the market is open so i can look at the bid/ask. this thing is thinly traded and might be good.
hlf - not cheap enough for me to buy right now, but will likely outperform the market in the next 2 years, revenues sucked last 2 quarters
utvl - this thing is going to the NYSE. Tom suggested that there are more shares than google says there are out there, dont have time to check. mcconnel (purdue professor) suggested 5% appreciation on average before listing and 5% decline in price for 6 months post listing on NYSE.
pcap - like it
acas - like it
mcgc - like it
gnw - like it
cno - like it
ahr - like it
grvy - seems poorly managed. no increase in revenues and yet increased expenses.
gfre - guidance includes dilution, i'm scared!
jadae - most of its income is from its discontinued operations in 2008
sclx - following up with company, added to my sorting list.
utvl - huge growth potential, will it be exercised? i'll buy some
chcg - topside catalyst: franchise strategy, downside force: decreasing profit margins, i'll buy some - i sold at around $1.50 to buy other deals.
gtls - prolly will appreciate in price over the next 2 years. just not enough for me to mention
snen - blah, just don't know. what happens when this loss goes away? is the business growing? you'd think so... but there isn't a very clear trend to me. negative cash from operations lately. lets wait and see .. throw this with nwd

i need to look at
bucy, cedc, midd, and my old stocks again to dump some money into for an investor that wants a safer play.

Now --- for some emails:

First, a picture: I picked the bottom on this one. Luck or skill --- your choice.



So, what do we do now? It’s got a P/E of about 10, maybe a little higher than that. You are getting a 6.4% dividend here. The trailing 12 month P/E is 14.

Historically trades between $60-$70. Was as high as $50 recently.

You’re looking at 1 year upside potential of about 75% (maybe going higher than where they traded historically cause they picked up National City). I think we could very easily sell out of this around $50 here shortly --- or you could just bail now and try to ride something else with more upside.
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T --- I didn’t bet on this one. I don’t know whether it will outperform or underperform. If you don’t know, don’t bet.

You bought it at $20, which baffles me because its 52-week low was $20.90 according to Google. So, you got the bottom, luck or skill.

There’s a double bottom on this one in October and March around $21. They just increased their dividend in Q1 2009. Their dividend is sustainable and pays 6.9%. There was some huge acquisition or something at the beginning of 2007 that exploded revenues. I think from mid 2007 to mid 2008, this was overpriced because of this abnormal growth.

I’d be getting out at $30. I might even be willing to jump ship at $25 depending on if there is something else out there that’s better.

I just downloaded all the larger companies I was looking at this fall. Out of the batch of them, there are probably over half that are still improving as if there wasn’t a crisis, but are priced now as if the crisis is supposed to hurt business.

I’ll be sorting through them here shortly and if I think I can choose 2-3 of the best to replace PNC, that’s what I’ll do.
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UTVL-Good call on the details. It is incredibly undervalued compared to its competitors. It just got listed on NYSE amex. There is some dilution.

Their SSD segment is losing sales fast. I don't know if that's due to cannibalization or what. Other segments are growing well. This last quarter they did not grow rev or earnings, but I think that's probably due to seasonality and the worst of the recession.

I'll probably invest a little and see what new things develop.

Tom
On Sun, May 24, 2009 at 10:02 AM, Bradford, Glen Richard wrote:
I think you are wrong here.

There were about 41M shares outstanding according to their 10K.

Then they reverse split on march 31, 2009. http://www.pinksheets.com/edgar/GetFilingHtml?FilingID=6513635

I think google’s share count is right.

What are your thoughts?

Glen

From: tcorm [mailto:tcorso] On Behalf Of Tom Corson-Knowles
Sent: Saturday, May 23, 2009 1:04 PM
To: Bradford, Glen Richard
Subject: UTVL

Hey,

UTVL has the wrong market cap shown on google finance. There are 38M share outstanding, so the real book value is almost $230 M. With $18M expected income for 2009, before dilution, that P/E seems high at over 20.

Tom
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The price goes up about 5% on the announcement and transition weeks, then trails off 5% over the next 6 weeks

________________________________________
From: Bradford, Glen Richard
Sent: Sun 5/24/2009 10:09 AM
To: McConnell, John J
Subject: OTCBB to NYSE Stock
Hey John,

First, I’d like to thank you for passing me in Finance the 3rd module this year. Second, I want your opinion on the average stock price changes on a company that goes from OTCBB to the NYSE.
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Hi Glen,

if you like ACAS, you'll love PCAP.

PCAP is in the same business, but has far fewer bad loans and a lower price/book, P/E and debt/equity.
They have violated bank covenants also, but only barely and recently.

Debt/equity is .96 vs 1.58 at ACAS, P/E (2010) 2.3 vs 4.2, price/book .22 vs .26

Slightly more expensive, but not much, is MCGC, which is in compliance with all covenants and will resume dividends earlier than the other two.

Among the chinese stocks, OPAI.OB is still trading at a P/E of 2, and half of book despite 30% growth.

I enjoy your articles very much. They are the best of all on SA, and I made a lot of money thanks to you.

Regards,

Fred

Labels: ahr, CHCG, CNO, GNW, mcgc, OPAI, pcap, sclx, snen, utvl

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