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I had sold in the 6.50s
now back in the 4.80s
RIDE THE TIGER long term chart back where it
all started.
Down over 20% in pre-market trading:
"Shares of Fuqi International (NASDAQ: FUQI) are plummeting in after hours trading after the company was notified by the SEC of a formal investigation and received a subpoena from the SEC for certain documents, relating to its failure to timely file required periodic reports, as well as other matters. Ouch!
FUQI has done an Acapulco cliff dive in the after hours, falling 21.26% to $5.00.
Fuqi International, Inc. (Fuqi) is a designer of precious metal jewelry in China, developing, promoting, and selling a range of products in the Chinese luxury goods market."
What are they doing, or better, NOT doing?
g.p.
looks like there was some short covering today
hopefully a lot more to come.
I bought today. Looking forward to company statement by tomorrow and really have to hope they complete the financials by Sept. 28.
Very encouraging action today.
Good Read. Thanks for posting. I think downside vrs. upside makes it worth hanging onto for the longer term and perhaps a good short term pop if they can get the corrected docs out.
PRO/CON EVALUATION OF FUQI INTERNATIONAL
http://seekingalpha.com/article/178358-fuqi-international-bad-news-more-than-priced-in
After a period of consolidation that has taken the stock some 60% lower, it seems to us that the "bad" news (there seems to be very little, if any) is more than priced in, while there is plenty of good news. We take stock by providing an in-depth analysis and links to the latest research on this company.
Fuqi International (FUQI) is a rapidly growing Chinese designer, wholesaler and retailer of gold and jewelry based in Shenzhen. Wholesale is still by far the most important part of its revenues (90%), but it's rapidly growing in retail, which carries much higher margins. To expand that business, the company placed 5.58M shares at $21.5 in a stock offering in late July 2009.
Its retail business grew from 3% of revenue (2008) to 9.9% of revenue in the first half of 2009, no doubt helped by its acquisition of Temix in August 2008 (for $19.7M in cash and restricted stock representing 6-7x net income and 3-4x EBITDA). As of June 30, 2009, the company had 64 retail counters, including 50 under the Temix brand and 14 under the FUQI brand, and a total of seven retail stores, which are all under the Temix brand. [Oppenheimer].
We'll discuss the good news, followed by a study of some of the arguments that could provide some reason for the very large sell-off (and short position). First, the good news:
Chinese economy and jewelry spending are growing at a brisk pace and doesn't seem to slow any time soon
Fuqi's track record: growing considerably faster than the jewelry market
Strategy of expanding business in higher margin activities, like retail and ODM (original design manufacturing) seems to be paying off already and has a long way to go still
The metrics are very impressive, the company with this kind of growth profile has a 2009 P/E of less than 10 and is even cheaper measured against next year's expected earnings and a (five year) PEG ratio of just 0.33. Total cash is $173M while total outstanding debt is only $48.3M (on revenue of $466.9M and net income of $48M)
Insiders own nearly 60% of the company.
Let's put a little meat on this:
1) Market growth
We believe China’s jewelry market will grow 10%-15% annually in the next 3-5 years, supported by the country’s fast-growing GDP, increasing disposable income and large and growing middle class. China’s rapidly growing GDP, over 10% annually in the past decade and expected to grow 8% despite the global economic downturn this year, has generated increasing wealth among its citizens. [Oppenheimer]
According to KPMG, China’s luxury brand consumption reached $6 billion in 2004, accounting for 12% of the world’s total luxury consumption (after Japan and the US, at 41% and 17%, respectively) and was projected to top $11.5 billion in 2015, surpassing all countries to become the biggest consumer of luxury products with nearly 30% of global share. Meanwhile, jewelry is one of China’s largest consumption categories, closely following real estate and cars. The Chinese market is the second largest for gold jewelry and the largest for platinum jewelry in the world, as well as one of the largest diamond consumer markets alongside the US and Japan. China’s jewelry market is estimated by Global Industry Analysis to reach $18 billion in 2010. National statistics provided by the government have shown annual growth in jewelry sales of 17%, 25%, 38% and 44% in 2004 to 2007, before a slowdown to 6% in 2008 due to the weak economy. [Oppenheimer]
Having just visited China, the thing that jumped out at me was that the real trend is simple demographics. The big takeaway of my trip is that I'm convinced of the power of the emerging middle class, and that China's economy will eventually become much more consumer-oriented. I'm in good company -- McKinsey estimates that the middle class will grow from 43% of China's population in 2008 to 76% by 2025. That's a lot of new consumers. [Tom Winner]
Fuqi says young Chinese have bought into Western consumerism more than their older counterparts have, and are more easily lured by flash and glitz. That gives the company a target demographic to build its growing business around. [Rich Duprey]
The excellent Oppenheimer report (.pdf) has a lot more information on the growth of the middle class and spending, drivers behind the market boom in jewelry. If anything, the slowdown in growth in 2008 and early 2009 might already be behind us. There is also a wealth of information on that report on the attributions of the market and Fuqi's positioning in it.
2) Fuqi's track record
Revenue growth the last three years has been a rather phenomenal 74.2%
Fuqi is one of China's largest nationwide wholesalers of jewelry. The company has an established track record as evidenced by its consistent profitability, attractive returns on invested capital, and ability to produce over 3,500 styles per year. Competencies in design, manufacturing, sales and distribution have enabled Fuqi to outperform in good and bad economies and fend off thousands of small competitors. Despite China’s economic slowdown, Fuqi was able to grow its wholesale revenues by 147% and 32% y/y in 2008 and 1H09, respectively, when numerous competitors closed in the same period. Moreover, with an established distribution network covering eight provinces, we believe Fuqi is on track to gain share and grow faster than the sector over the foreseeable future. [Oppenheimer]
3) Strategy expanding margins
Fuqi’s retail expansion strategy could lead to improved returns, higher margins, and brand development. Fuqi’s growth strategy is to become a vertically integrated jewelry company to achieve margin improvement and brand recognition. Growing out of a leading jewelry manufacturer and wholesaler, Fuqi’s strong design and manufacturing capability could provide competitive advantage for its emerging retail brands and stores. Fuqi’s vertical integration provides cost advantages and flexibility in merchandising, which potentially should enable its Fuqi and Temix brands to compete more effectively with existing retailers. Currently, management expects to reach 100 retail locations by year-end from 70 at 2Q09. Based on operating results to date, we believe the company is on track to improve its margins as its retail business mix increases. [Oppenheimer]
FUQI believes that its wholesale business will facilitate its expansion plans in retail as very few retailers have a well-established wholesale platform. [Oppenheimer]
4) Metrics
In our opinion, strong balance sheet positions Fuqi to pursue its strategy of organic expansion and acquisition. Jewelry is a capital-intensive business with sizeable working capital to stock inventories and purchase raw materials. We estimate Fuqi currently has $140 million in cash as well as $87 million in inventory (as of June 30), most of which is gold and liquid. In addition, we believe Fuqi’s strong balance sheet allows the company to take advantage of market downturns to make acquisitions at attractive prices, as evidenced by its acquisition of Temix in August 2008, which has proven to be highly accretive to date. [Oppenheimer]
One might also want to compare Fuqi's valuation metrics with other companies in the sector, this is provided by Wisco Research (p.4). Fuqi comes off as particularly favourably valued compared to both domestic and foreign Jewlery companies, even more so if one takes Fuqi's generally much faster growth and clean balance sheet into consideration as well.
5) Insider holdings
we believe management’s interest is well aligned with investors’ as Fuqi has significant insider holdings. Following the recent $100 million follow-on offering, the company’s officers and directors as a group own an aggregate of 48% of total outstanding shares, including 42% owned by chairman and CEO, Mr. Yu Kwai Chong. [Oppenheimer]
Fuqi ownership (from MSN)
Sell-off?
The company had a very large positive earnings surprise in the last quarter (eps was 72 cents versus consensus expectations of 44 cents, and just 31 cents in Q308!) and upped it's guidance for the last quarter, as well as the whole of 2009 (to $2.21-$2.27). If that didn't get investors happy, they also expect 2010 wholesale revenue to grow at least 25% while retail revenue is expected to increase at least 50% in 2010.
However, its shares, which had already come back from the high's in the low 30s, sold off sharply and have been in a funk ever since. On first sight, that doesn't make sense, so we dug deeper into this paradox.
We managed to acquire four recent research reports (available here) and have been meticulously studied these in order to come up with any rational explanation for this seeming paradox. Even more curious is the large short position (47% of the float), so we zoomed into anything that could possibly be negative to assess its seriousness. This is what we found:
Negative cashflow
Wholesales ex-ODM missed projections
ODM business a one-off?
Retail sales didn't get off to a flying start
Gold price
Let's discuss these.
1) Negative cashflow
Investments predate returns for companies expanding as rapidly as Fuqi has. Rising material cost (gold) further ties down cash-flow, so we're not overly alarmed here.
2) Wholesales ex ODM missed projections
According to Wisco Research:
Revenue of $127 million fell below our $131 million estimate because of a political issue that hindered sales at the end of September. 2009 was the 60th year anniversary of China’s National Holiday and the government didn’t allow jewelry sales for several days before the Oct. 1st holiday on the security concerns, which means FUQI was not able to deliver products and record revenues during that period.
According to William Blair & Co.:
Excluding ODM sales in both periods, wholesale sales growth would have been 11% in the quarter, compared with 29.7% including ODM. Excluding ODM and adjusting for $5.0 million in wholesale revenues that were pushed from the third quarter into the fourth quarter, wholesale revenue growth would have been up 17%, still below our estimate of 26%. [p.2]
So, ODM saved the day and more than compensated for the closing down during the quarter for political reasons. The market apparently took this as a negative, but that seems odd to us. These are two one-offs, perhaps, or not. The closing down certainly is a one-off, but is the ODM business? If it's not, instead of a negative, this should have been interpreted as a positive. Let us explain.
3) ODM business a one-off?
Essentially, the jury is still out on this. First, what is ODM (original design manufacturing)?
The ODM business, which is part of the wholesale business, differs little from the base wholesale business in that the wholesale customers supply the raw material to Fuqi for production. Unlike the rest of the wholesale business in which distributors pay for the material, a design fee, and a processing fee, with ODM orders distributors pay only a design fee and a processing fee. The orders for the core wholesale business and orders for ODM are derived from the same group of customers. Typically, ODM orders are filled for larger customers that are also placing core wholesale orders. [William Blair & Co. p.2]
How high are these margins, compared to the wholesale business?
Gross margin for ODM is at least twice that of the core wholesale business, which drove wholesale gross margin of 23.6%, compared with our 12.5% estimate, and the EPS upside in the quarter. [William Blair & Co. p.2]
Which is why we really have a hard time understanding the following.
We view these ODM orders as lower quality than core jewelry sales and need to monitor the trend to make sure this does not continue. At a minimum, FUQI management made good use of extra capacity to land high-margin business, but this is not the core jewelry business for which investors are involved in FUQI shares. [Merriman, Curhan and Ford]
How can it be lower quality if they carry at least twice the margins of traditional wholesale business? The only way that could possibly be true is if these are a one-off. Is it a one-off?
Because it is difficult to predict how much of the wholesale business will be in ODM orders in the future, management’s guidance includes a normal (minimal) level of ODM business. That said, ODM has the potential to increase over time, adding a source of high-margin growth. [William Blair & Co. p.2]
So, management doesn't factor in a whole lot of ODM business but nevertheless increased expectations for this year and the next (see above), a sure sign that they expect the disappointing wholesales ex-ODM to be a one-off. What's more, because margins on ODM are at least twice compared to wholesale, if they become a trend, that would be a huge positive for the stock.
We conclude: the market seems to think that the disappointing wholesales ex-ODM was permanent and the positive ODM surprise a one-off, but it's much more likely to be exactly the other way around.
4) Retail business disappointed in Q3
One important plank of the strategy towards accelerating growth and margins is to grow a retail business, which carries much higher margins compared to their traditional wholesale business.
Retail sales of $9.7 million fell short of our $12.7 million estimate, due to delays in new store/counter openings. Net new counter openings were eight, compared with our estimate of 15, due in part to delays associated with preparations for the Golden Week. A higher percentage of retail sales were from gold (rather than higher-margin platinum or studded jewelry), which drove a lower-than-expected retail gross margin of 22.6%, below our 34% estimate. Management maintained its full-year guidance of 95-100 new store openings and also expects product mix shift in the fourth quarter to higher-margin products. [William Blair & Co. p.2]
Retail margins below expectations. Retail margins of 22.6% came in below our 31.5% estimate and the 38.0% margin last year. Management attributed this to product mix with more lower-margin platinum products (investing) instead of gold/gemstone products (gift-giving). We expect margins to rebound in 4Q with more gift-giving holidays vs. none in 3Q. [Merriman, Curhan and Ford]
So there were some reasons for last quarter disappointments in retail, but both management and Merriman expect things to pick up in this quarter. As we've already shown above, management expects retail to grow at least 50% next year, due to an aggressive expansion.
The Retail business is making good progress. Currently, FUQI has 72 retail counters. The company plans to have a total of 95-100 retail locations by the end of 2009 and additional 80-100 retail locations in 2010. [Wisco Research p.2]
5) Gold price
Unexpected volatility and price declines in gold and platinum spot prices could negatively impact Fuqi’s financial performance. Fuqi’s sales are positively correlated to gold spot market prices, suggesting rising gold prices benefit Fuqi by driving higher revenues. During periods of rising inflation, demand for gold and gold jewelry increases as consumers seek to preserve value of their savings. Meanwhile, as Fuqi employs FIFO method of accounting to record its COGS, a rise in the price of gold has resulted in margin expansions, as we have seen during 1H09. The company estimated the recent gold price increase contributed 1.5-2.5 percentage points to gross margins. Conversely, if spot prices fall, Fuqi’s revenue growth and margin expansion could slow or even decline. [Oppenheimer]
While there has been a pullback in gold prices in the last two weeks, these are still considerably higher than a year ago. Unless one expects gold to crash, this should still be considered a net positive.
Conclusions
We really have a hard time interpreting all this as a negative, therefore. So let us conclude:
For a company that's rapidly expanding and having to purchase raw material at ever higher prices, it's not a serious problem having negative cash flow.
Wholesales disappointed in Q3, but that was a one-off. This is both explained by the forces that produced the disappointment (forced closure because of holidays) as well as management upping expectations for Q4.
The ODM business that produced a huge positive earnings surprise could very well be a more permanent feature. Because it's high margin nature, this could add a significant new driver, we really cannot understand those who argue the ODM business is a negative. At the minimum, it was a one-off and wholesale growth returns to trend. More likely, ODM keeps adding more to the bottom line.
The same reasons that produced the one-off disappointing wholesales were partly responsible for the disappointing retail margins as well (as was the product mix). However, management and analysts are pretty convinced this will be (more than) remedied in Q4 and next year.
We think that the sell-off from the 30s to the high teens is way overdone. We can't see them going much lower (barring any major disasters) and the risk-reward situation seems very favourable to us. When the next earnings report comes closer, we expect these shares to start rallying. But this could happen sooner rather than later.
Looks pretty exciting this morning. I have some $8 calls and am loving it!
Looks pretty exciting this morning. I have some $8 calls and am loving it!
I used www.stocksource.us and no, no hint of anything soon.
GLTY,
g.p.
Hi Geo... just wondering where you found this press release and if there's been any hint that we'll be hearing something anything soon.
Regards,
Randy
While it looks like re-stated Financials
are all right, your near-term hope will likely
be achieved.
re:"Jun. 30, 2010 (PR Newswire) --
SHENZHEN, China, June 30 /PRNewswire-Asia/ -- FUQI International, Inc. (Nasdaq: FUQI) today announced an update on the status of its financial filings for the first three quarters of 2009, its 2009 Form 10-K and Form 10-Q for the first quarter 2010.
As previously announced, the Company anticipated filing its 2009 annual report and restated 2009 quarterly reports in June 2010. However, due to the continued efforts on the Company's restated financial statements for the first three quarters of 2009 and the financial statements for the 2009 annual report, the Company is unable to file in June. The Company is committed to filing the reports as soon as practicable. The Company expects to file its first quarter 2010 results after it completes and files its Form 10-K for the year ended December 31, 2009 and the 2009 restated quarterly reports."
g.p.
Is there any reason why this thing can't move to 8.65++ in the very near term?
Is scheduled to announce earnings before the market opens on Thursday, May 6th:
http://www.learningmarkets.com/News-Feed/2010050520484/preparing-for-fuqi-internationals-earnings-announcement-fuqi-fosl-bc-mov.html
10K due on March 15, they already file the 10K NT for 10 days extension.
Dec 14, 2009 WONG CHING WAN
Officer direct Option Execute 9.00 26,877
Dec 14, 2009 WONG CHING WAN
Officer direct Sell 19.45 to 19.62 26,877
CFO excercise stock option and sold right before the year end. He must have known the financial problem already!!!!!!
Abraham, Fruchter & Twersky, LLP Announces Investigation of Fuqi International, Inc.
Mar 18, 2010 4:10:00 PM
View Additional ProfilesNEW YORK--(BUSINESS WIRE)-- Abraham, Fruchter & Twersky, LLP has commenced an investigation concerning possible violations of state and federal securities laws by Fuqi International, Inc. ("Fuqi International" or the "Company") (NASDAQ: FUQI) related to the Company's public statements regarding its financial performance between May 15, 2009 through March 16, 2010.
On March 16, 2010, the Company revealed that it "identified certain accounting errors that are expected to have a material impact on the previously issued quarterly financial statements for the first three quarters of 2009." The Company stated that due to its accounting errors, "the cost of sales for each of the periods were understated and gross profit and net income, as a result, were accordingly overstated." Fuqi International announced that, as a result of its financial misstatements, the Company will delay the release of its final fourth quarter and year-end 2009 financial results, and will also file an extension for the filing of its Form 10-K for 2009 with the U.S. Securities and Exchange Commission. The day after this disclosure, the Company's shares closed at $11.90 per share, representing a 37 percent drop from the previous day's closing price of $19.00 per share.
If you purchased the common stock of Fuqi International between May 15, 2009 through March 16, 2010 and would like to discuss this action, or if you have any questions concerning this notice or your rights as a potential class member, you may contact: Mitchell M.Z. Twersky or Arthur J. Chen of Abraham, Fruchter & Twersky, LLP at 212-279-5050, or via e-mail at info@aftlaw.com or achen@aftlaw.com, respectively.
Abraham, Fruchter & Twersky, LLP has extensive experience in securities class action cases, and the firm has been ranked among the leading class action law firms in terms of recoveries achieved by a survey of class action law firms conducted by Institutional Shareholder Services.
Attorney Advertising. Prior Results Do Not Guarantee A Similar Outcome.
Source: Abraham, Fruchter & Twersky, LLP
----------------------------------------------
Abraham
Fruchter & Twersky
LLP
Mitchell M.Z. Twersky
Arthur J. Chen
212-279-5050
Fuqi International Inc. $ 19.18
FUQI -0.02
Short Interest (Shares Short) 6,694,800
Days To Cover (Short Interest Ratio) 9.0
Short Percent of Float 43.67 %
Short Interest - Prior 6,589,300
FUQI - holding for $25
What pps did you post the short at?
around $16 or $17?
wow that's some short!
Financial highlightsSales* 466.88 Mil
Income* 48.01 Mil
Sales Growth* +152.50%
Income Growth* +187.90%
Net Profit Margin 10.28%
Debt/Equity Ratio 0.17
FUQI to Exclusively Commercialize, Manufacture, Distribute and Market Popular Chinese Animated Cartoon Jewelry ProductsJanuary 8, 2010 9:01 AM ET advertisement
Article tools E-mail this article Print-friendly version Discuss this articleStocks mentioned in this articleFuqi International Inc (FUQI) Stock Quote, Chart, News, Add to WatchlistRelated newsMarket Report -- In Play (FUQI)FUQI International Announces Participation in January Investor Conferences
All PR Newswire newsSHENZHEN, China, Jan. 8 /PRNewswire-Asia/ -- FUQI International, Inc. FUQI today is pleased to announce that the Company has recently launched a new product campaign promoting a series of gold jewelry products based on the popular Chinese animated cartoon figures, "Pleasant Goat and Big Big Wolf." FUQI is the first jewelry company in China to obtain the exclusive rights to commercialize, manufacture, distribute, market and sell "Pleasant Goat and Big Big Wolf" jewelry products in mainland China.
The Company signed an exclusive two year partnership agreement with a subsidiary of Infoport Management, which owns the licensing distribution rights to the "Pleasant Goat and Big Big Wolf" animated series. Under the agreement terms which expire at end of January 2012, FUQI will exclusively manufacture, distribute, market and sell in mainland China new jewelry products such as precious metal coins, bracelets, pendants and rings based on these animated cartoon characters.
"We are delighted and honored to be the first and only Chinese jewelry company in China to have the exclusive rights to design and produce various jewelry products using these well known Chinese animated characters," said Mr. Yu Kwai Chong, Chairman and CEO of FUQI International. "We believe this new partnership uniquely distinguishes us from our competition and enhances the strength of our brand. Most importantly, it allows us to attract new customers in our Beijing and Shanghai-based retail locations as well as gain new accounts in our wholesale channel. The Pleasant Goat and Big Big Wolf cartoon figures are pop icons in China and we expect this series of products to be welcomed by kids and a younger audience. The timing of this new product launch is also ideal for FUQI as we make efforts to leverage the peak retail season to capture sales of this new product line and benefit our brand on both wholesale and retail levels. We believe that a successful roll out of our animated product series can lead to potential development of other exclusive agreements with other popular characters."
"We are truly excited about the launch of this project and plan to introduce additional phases of our new product series in the future, allowing us to further establish ourselves in the juvenile market. We believe that the "Pleasant Goat and Big Big Wolf" products will be as popular as our Lunar New Year Tiger figures," commented Senior Project manager, Mr. Xu Zhu. "Our plan is to sell these new products in our retail outlets in Tier 1 cities, such as Shanghai and Beijing, and utilize authorized dealers in our distribution business to better control our product distribution channels in other cities around China. We have received many requests and orders from regional and local Chinese jewelry distributors to become authorized regional distributors for this new line of products, which can eventually lead to additional sales opportunities for our broader portfolio of jewelry products in the future."
About FUQI International
Based in Shenzhen, China, FUQI International, Inc. is a leading designer, producer and seller of high quality precious metal jewelry in China. Fuqi develops, promotes, manufactures and sells a broad range of products consisting of unique styles and designs made from gold and other precious metals such as platinum and Karat gold.
About InfoPort Mangement
Infoport Management Ltd. is authorized to operate a diversified commodities company that specializes in the style of the merchandise for customers to provide business services authority to promote goods and business customers to increase the brand's market exposure and increase brand image and goodwill.
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward- looking statements can be identified by the use of forward-looking terminology such as "will" "believes", "expects" or similar expressions. These forward-looking statements may also include statements about the Company's proposed discussions related to its business or growth strategy, which is subject to change. Such information is based upon expectations of the Company's management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions. Such risks and uncertainties include, but are not limited to, adverse capital and credit market conditions, the vulnerability of the Company's business to a general economic downturn in China; fluctuation and unpredictability of costs related the gold, platinum and precious metals and other commodities used to make the Company's products; the Company's ability to obtain all necessary government certifications and/or licenses to conduct its business; the Company's recent entry into the retail jewelry market; the Company's reliance on one source for gold; and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company does not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see the Company's most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and its subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov .
For more information, please contact:
Ms. Charlene Hua
EVP of Financial, Capital Market & Corporate Development
Phone: +852-9468-2497 (Hong Kong)
IR Email: IR@FuqiIntl.com
Bill Zima
ICR Inc. (US)
Phone: +1-203-682-8200
Five Small- and Mid-Caps With Upside
.Companies:Amedisys Inc.Fuqi International, Inc.Pre-Paid Legal Services, Inc..ByJohn Reese, RealMoney Contributor , On Friday January 8, 2010, 11:30 am EST
Last year was one of the better years for stocks in a long time, with the S&P 500 and Russell 2000 both up more than 25% for the year. Though the indices had strong returns, many individual stocks did even better, with so-called "junk stocks" leading the way and producing returns north of 50% in many cases.
As I have discussed, many experts expect this outperformance of lower-quality names to come to an end in 2010, and there are already signs that it is happening. Many experts have also predicted that large stocks will reassume a leadership position in the coming year as part of the market's return to quality.
When I see predictions like that, I like to look at my "guru system" to see if the fundamentals support these assertions. My guru system screens through over 6,000 stocks, using the proven long-term strategies of investing legends such as Warren Buffett, Ben Graham, Peter Lynch and Martin Zweig. My Validea Hot List portfolio combines all of the strategies of these legends and identifies the top 20 out of the 6,000 stocks I follow, using all of their strategies.
The current composition of the Validea Hot List portfolio suggests that not only is there not more value in large-caps at the current time, the opposite is actually true. The portfolio is more focused on small- and mid-cap names than it has been in a long time. This means that despite the recent run in the market, many small stocks are fundamentally sound and worthy of consideration. Of the 20 stocks currently in the portfolio, 14 are either small- or mid-cap stocks.
The smallest of the small-caps on the list are Pre-Paid Legal Services, which has a market cap of $471 million, and Fuqi International, whose market cap is $562 million.
Pre-Paid Legal Services designs, underwrites and markets legal expense plans. Pre-Paid Legal Services gets passing grades from an impressive three of my guru strategies. The first is my model based on Peter Lynch's approach to investing. Its best-known variable is the P/E/G ratio, which looks at the price-to-earnings ratio relative to growth; this is a measure of how much the investor is paying for growth. A P/E/G of 1.0 or less is acceptable, and 0.5 or below is really impressive: Pre-Paid Legal Services' P/E/G is an impressive 0.37.
My Warren Buffett-based strategy also likes this company. This strategy is unique among the ones I use, because it projects an annual increase in the stock's price averaged over the next decade. A projected 15% or more a year is acceptable; Pre-Paid Legal Services is expected to earn for its investors a remarkable 26.7%.
The third strategy that looks favorably at this company is based on Joel Greenblatt's writings. It ranks a stock by comparing it with the thousands of stocks in our database, using both a company's earnings yield (which is the inverse of the P/E ratio) and its return on capital. Again, Pre-Paid Legal Services wins its case: It is ranked No. 2 out of the 6,000 stocks we cover.
Fuqi designs and promotes precious-metal jewelry for the Chinese luxury goods market. The Lynch strategy likes this company, in part because its P/E/G is a very, very low 0.23. The strategy I base on the writings of James P. O'Shaughnessy also finds Fuqi to be sparkling. Some of what this strategy likes about Fuqi is its market cap (the minimum is $150 million, and Fuqi's is $562 million), earnings per share that have increased in each of the past five years, a price-to-sales ratio of 1.2 (the strategy sets an upper limit of 1.5) and a relative strength rating of 89.
Ranking Mid-Caps
My system is also finding value in the mid-cap arena. One of my highest-rated mid-cap stocks is Tidewater, which operates the world's largest fleet of offshore supply vessels. Its market cap is just shy of $2.6 billion. My strategy based on Benjamin Graham's writings likes this company, because its sales of $1.3 billion exceed the minimum allowed ($340 million), current assets are more than double current liabilities (2.78:1), long-term debt is significantly below net current assets ($275 million vs. $440 million), and growth of earnings per share has been very strong, at a total of 213% over the past 10 years. Also, the price-to-earnings ratio is a moderate 7.2:1.
Also liking Tidewater is the Lynch strategy, in part because of the company's extraordinarily low P/E/G ratio: 0.16. It also likes that inventories as a percentage of sales has been declining (though admittedly, the company does not have much in the way of inventories), and debt is quite small when compared with equity (debt is 13% of equity).
Another top ranked mid-cap stock is Amedisys, whose market cap is $1.45 billion. This company, which provides home health care nursing services, meets the approval of my Joel Greenblatt-based strategy. This strategy looks at just two variables. One is earnings yield, which is earnings before interest and taxes divided by the company's enterprise value. The strategy ranks each company, and this ranking includes all the thousands of stocks in my Validea.com database. On the basis of earnings yield, Amedisys is ranked 99. Then the second criterion, return on total capital, is ranked, and here the company comes out No. 8. The final step is taking these two rankings and combining them into a final ranking, and here, too, Amedisys is ranked No. 8 among all the stocks in the database, which is very impressive.
The final mid-cap that my system is currently high on is Proassurance, whose market cap is $1.7 billion. This is a company in the professional liability insurance business, especially for such health care providers as physicians, dentists and hospitals. The Lynch strategy favors Proassurance. The company's P/E/G is a very, very low 0.2, based on a P/E of 8.4 and a growth rate (using the three-, four- and five-year historical growth rates) of 41%. Also in its favor is a solid return on assets (4.74% vs. the strategy's minimum of 1.0%) and an equity-to-assets ratio of 35%, vs. the 5% minimum required by the strategy.
Despite many expert predictions that large-caps will return to prominence, my system is currently finding more value in the small- and mid-cap areas. And these five companies, all with strong support from the guru strategies, appear poised to continue producing strong returns.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider PPD to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
FUQI to Exclusively Commercialize, Manufacture, Distribute and Market Popular Chinese Animated Cartoon Jewelry Products
Jan 8, 2010 9:01:00 AM
SHENZHEN, China, Jan. 8 /PRNewswire-Asia/ -- FUQI International, Inc. (Nasdaq: FUQI) today is pleased to announce that the Company has recently launched a new product campaign promoting a series of gold jewelry products based on the popular Chinese animated cartoon figures, "Pleasant Goat and Big Big Wolf." FUQI is the first jewelry company in China to obtain the exclusive rights to commercialize, manufacture, distribute, market and sell "Pleasant Goat and Big Big Wolf" jewelry products in mainland China.
The Company signed an exclusive two year partnership agreement with a subsidiary of Infoport Management, which owns the licensing distribution rights to the "Pleasant Goat and Big Big Wolf" animated series. Under the agreement terms which expire at end of January 2012, FUQI will exclusively manufacture, distribute, market and sell in mainland China new jewelry products such as precious metal coins, bracelets, pendants and rings based on these animated cartoon characters.
"We are delighted and honored to be the first and only Chinese jewelry company in China to have the exclusive rights to design and produce various jewelry products using these well known Chinese animated characters," said Mr. Yu Kwai Chong, Chairman and CEO of FUQI International. "We believe this new partnership uniquely distinguishes us from our competition and enhances the strength of our brand. Most importantly, it allows us to attract new customers in our Beijing and Shanghai-based retail locations as well as gain new accounts in our wholesale channel. The Pleasant Goat and Big Big Wolf cartoon figures are pop icons in China and we expect this series of products to be welcomed by kids and a younger audience. The timing of this new product launch is also ideal for FUQI as we make efforts to leverage the peak retail season to capture sales of this new product line and benefit our brand on both wholesale and retail levels. We believe that a successful roll out of our animated product series can lead to potential development of other exclusive agreements with other popular characters."
"We are truly excited about the launch of this project and plan to introduce additional phases of our new product series in the future, allowing us to further establish ourselves in the juvenile market. We believe that the "Pleasant Goat and Big Big Wolf" products will be as popular as our Lunar New Year Tiger figures," commented Senior Project manager, Mr. Xu Zhu. "Our plan is to sell these new products in our retail outlets in Tier 1 cities, such as Shanghai and Beijing, and utilize authorized dealers in our distribution business to better control our product distribution channels in other cities around China. We have received many requests and orders from regional and local Chinese jewelry distributors to become authorized regional distributors for this new line of products, which can eventually lead to additional sales opportunities for our broader portfolio of jewelry products in the future."
About FUQI International
Based in Shenzhen, China, FUQI International, Inc. is a leading designer, producer and seller of high quality precious metal jewelry in China. Fuqi develops, promotes, manufactures and sells a broad range of products consisting of unique styles and designs made from gold and other precious metals such as platinum and Karat gold.
About InfoPort Mangement
Infoport Management Ltd. is authorized to operate a diversified commodities company that specializes in the style of the merchandise for customers to provide business services authority to promote goods and business customers to increase the brand's market exposure and increase brand image and goodwill.
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward- looking statements can be identified by the use of forward-looking terminology such as "will" "believes", "expects" or similar expressions. These forward-looking statements may also include statements about the Company's proposed discussions related to its business or growth strategy, which is subject to change. Such information is based upon expectations of the Company's management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions. Such risks and uncertainties include, but are not limited to, adverse capital and credit market conditions, the vulnerability of the Company's business to a general economic downturn in China; fluctuation and unpredictability of costs related the gold, platinum and precious metals and other commodities used to make the Company's products; the Company's ability to obtain all necessary government certifications and/or licenses to conduct its business; the Company's recent entry into the retail jewelry market; the Company's reliance on one source for gold; and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company does not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see the Company's most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and its subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov .
For more information, please contact:
Ms. Charlene Hua
EVP of Financial, Capital Market & Corporate Development
Phone: +852-9468-2497 (Hong Kong)
IR Email: IR@FuqiIntl.com
Bill Zima
ICR Inc. (US)
Phone: +1-203-682-8200
SOURCE FUQI International, Inc.
----------------------------------------------
Ms. Charlene Hua of EVP of Financial
Capital Market & Corporate Development
+852-9468-2497 (Hong Kong)
IR@FuqiIntl.com; or Bill Zima of ICR Inc. (US)
+1-203-682-8200
Interesting, Pic. Quite an increase since last.
Shorts really on the increase (SP under $20..)
g.p.
Short Interest (Shares Short)
5,748,300
Days To Cover (Short Interest Ratio)
4.7
Short Percent of Float
37.50 %
Short Percent of Float 27.21 %
Short % Increase 62.11 %
http://www.shortsqueeze.com/?symbol=fuqi&submit=Short+Quote%99
So what is next on your list of goodies "prudent capitalist"
Ouch is right, but don't feel bad. I got in this at $3.80, and sold my last shares of it between $15 and $20, and now it is pushing up against $30. go figure. I understand that the linchpin on FUQI was when they opened the retail counters and stores. No one believed the Chinese would buy jewelry like they have at a retail counter.
G.P. I say ouch and boy was I wrong. I think I'll stick to my micro penny stocks. I seem to have alot more luck over their in that arena.
Congrats guys .. where do you think this is going?
Do you think it will see $40 before it see's $20 or u
s $20 the yesteryears now.
So, c-c-kid, what you say, now?
g.p.
FUQI short this mofo at $20 they got nuthin when they report in a couple of weeks. She is going to $10
MARK MY WORDS!!!
This run is not necessarily over
Been watching this one for a few months expecting some chatter too. None.
One I definitely missed.
g.p.
I cannot believe there has been no chatter on this board since 2008
damn stock only ran about 500% as of late
very sad
Good News out ths Morning..... not too many stocks can say that.
http://biz.yahoo.com/prnews/081114/cnf042.html?.v=1
Press Release Source: FUQI International, Inc.
FUQI International, Inc. Reports Third Quarter 2008 Financial Results
Friday November 14, 7:30 am ET
-- 3Q08 Revenues Increased 159% to $93.7 Million
-- 3Q08 Net Income Increased 140% to $6.5 Million, or $0.31 per Diluted Share
-- Company Raises Fiscal 2008 Revenue, Net Income and Diluted EPS Forecast
SHENZHEN, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- FUQI International, Inc. (Nasdaq: FUQI - News) today announced financial results for the quarter ended September 30, 2008.
ADVERTISEMENT
Revenues for the third quarter of 2008 increased 159% to $93.7 million from $36.2 million in the third quarter of 2007, due to increases in sales volumes and selling prices in the wholesale business. Wholesale contributed $90.5 million to overall revenues, representing growth of 152% year over year, and exceeding expectations. Retail revenues were slightly lower than expected, primarily as a result of slower retail business in Beijing and Shanghai regions during the Olympic Games. Retail contributed $3.2 million to overall revenues during the quarter, with $2.2 million coming from Temix and $1.0 million from Fuqi branded products.
Gross profit in the third quarter of 2008 increased 144% to $11.0 million from $4.5 million for the same period in the prior year. Gross profit was positively impacted by higher than expected sales in the wholesale business and by the contribution of incremental gross profits from the retail business. Gross profit margin was 11.7% in the third quarter of 2008, down from 12.4% in the same period of the prior year.
Operating expenses in the third quarter of 2008 increased to $2.7 million from $807,000 in the same period of the prior year. This increase was a result of expanded administrative costs required to support a growing revenue base, higher promotion costs, payrolls, business taxes, options granted and increased salaries to certain executives, as well as expenses incurred as a result of being a publicly traded company. Additionally, personnel expenses associated with retail expansion, as well as higher security costs during the Olympics contributed to higher operating expenses. Operating income in the third quarter increased 124% to $8.3 million from $3.7 million in the third quarter of 2007.
Net income in the third quarter of 2008 increased 141% to $6.5 million, or $0.31 per diluted share, from $2.7 million, or $0.21 per diluted share, in the same period of the prior year. Net margin was 7.0%, down from 7.5% in the prior year period. The decrease in net margin was primarily a result of increased operating expenses due to infrastructure expansion to support revenue growth. Non-cash items in the third quarter of 2008 included a $149,000 expense for equity based compensation and a $209,000 retail barter revenue gain. (Barter exchanges are incurred when retail customers trade-in their jewelry to obtain barter credits that can be used in lieu of cash to buy jewelry products at the Company's retail counters). Third quarter 2008 net income also benefited from a $23,000 non-operating income derivative gain associated with gold futures the Company purchased to hedge against its inventory position during the quarter.
On September 30, 2008, the Company had cash of $56.2 million, compared with $63.3 million on December 31, 2007, as the Company invested in inventory to fill up retail counter and store show cases and fulfill large orders generated from jewelry trade fairs, and as the Company paid $3.9 million cash consideration during the quarter for the acquisition of Temix. Total inventory at the end of the third quarter was $50.4 million, up from $35.1 million at the end of the second quarter, which includes inventory valued at approximately $9.8 million from the Temix acquisition. Management expects inventory and cash positions to fluctuate from time to time as the Company anticipates periods of high demand and increases of inventory to meet that expected demand.
Mr. Yu Kwai Chong, Chairman of Fuqi International, commented, "We are very pleased with our results for the third quarter, which exceeded our expectations, despite some slowing in the growth rate of the global economy, and therefore the Chinese economy, as well as the financial impact of the Olympics, which not only caused slower than expected retail sales, but also higher security expenses. In spite of these issues, we continue to see increasing demand for our products, and larger orders from our existing customers. We also believe that recent government stimulus policies can motivate additional consumer spending. We have a strong balance sheet to support our growth, the right mix of products and distribution and a strong management team. We believe that Fuqi is poised to build the leading provider of luxury jewelry products in China."
2008 Financial Outlook
For the full year 2008, the Company is raising its 2008 revenue, net income and diluted earnings per share estimates. It now expects total revenue of approximately $345 - $350 million. This forecast is comprised of $337 - $341 million in expected wholesale revenue and $8 - $9 million in expected revenue from retail. The Company also anticipates consolidated net income of $25.9 - $26.5 million, and diluted EPS of $1.17 - $1.20, based on a weighted average share count of 22.1 million shares.
For the fourth quarter, the Company anticipates total revenue of approximately $107-112 million, which represents $103 - $107 million in wholesale revenues and $4 - 5 million in retail revenues. Net income in the fourth quarter is expected to be in the range of $7.6 - $8.0 million, or $0.34 - $0.36 per diluted share, based on a weighted average share count of 22.1 million shares. Gross margin for the fourth quarter is expected to be approximately 11.0%, and net margin is expected to be approximately 7.1%.
Mr. Chong continued, "Having handily exceeded our own expectations for the third quarter, in the face of a slowing global economy, we remain optimistic about the future growth of Fuqi in China, as evidenced by our increase in guidance. Our growth will continue to be driven by wholesale revenue in the near term, but we believe that longer term the Temix and Fuqi retail brands can have a significant impact on our margins. We believe we are well positioned in both the wholesale and the retail business to capture ongoing demand for luxury jewelry products - primarily gold, but also platinum and diamond. Our Temix expansion is complete in the larger markets and we are beginning to focus our expansion into Tier 2 and 3 cities, where we believe the best future opportunities for revenue growth are. To serve the overall business, we will continue to manage our balance sheet to be prepared to capitalize on opportunities we see in the marketplace."
Conference Call
The Company will conduct a conference call to discuss the third quarter 2008 results today, Friday, November 14, 2008 before the market open at 8:30 am ET. Listeners may access the call by dialing #1-913-312-4374. To listen to the live webcast of the event, please go to http://www.viavid.net. A replay of the call will be available through November 21, 2008. Listeners may access the replay by dialing # 719-457-0820; Passcode: 6545879.
About FUQI International, Inc.
Based in Shenzhen, China, FUQI International, Inc. is a leading designer of high quality precious metal jewelry in China, developing, promoting, and selling a broad range of products in the large and rapidly expanding Chinese luxury goods market.
looking real good - still holding a few long term
Hey G_Money. Suppose you like the way FUQI is trading up today. It is really a good value even here. Guess we should have bought more. :)
Randy
lol- i was agreeing with you that at some point the stock will have to take a breather - it can't continue to go straight up day after day - i think over the next few weeks we may see $15
Which part....about not listening to me or the stock trading flat for a time? :)
Hey G_money. I think the stock will eventually head higher. My concern is the as the story becomes old news...the momo players will grab their profits and the price could easily go flat for a while.
But don't ncessarily listen to me cause I sold too early. :)
Randy
fuqi -$10.80- looking good today
options seem like a good way to make $-but so far to complicted for me
I was gone most of the day....but am back now. It seems I sold my options too soon. Grr. :(
I was just about to check out the IBOX to see if you've made any progress.
Randy
The Light has come into the world, but men have preferred darkness. If you want to know the Truth, just ask. :)
Check out a new Ihub board I've started:
AS IRON SHARPENS IRON http://investorshub.advfn.com/boards/board.aspx?board_id=12482
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Fuqi International Inc.
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www.fuqi.com.cn/Index2.Html
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