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BOWS - If you really think CEU is crap, you should short it big time, monumentally, at its current price of 2.6.
I have no particular opinion on CEU but please let me know when you start shorting, I may pick up a few shares below 2 or so. .
HRBN - 16.78, +2.2%
HRBN is in general uptrend over the last two weeks, after a huge drop caused by Barring news.
If you are a chart reader, you would notice the uptick on Market Maker controlled indicator (ChiOsc). It is normally a leading indicator and its uptick is very bullish for the stock.
Americanbulls.com posted a "buy confirmed" rating.
Please do note that this stock is often driven by events, not by charts.
Purchases.
Bought some CHGY the day before yesterday, YONG and LPH yesterday, CCME today. Bidding for a few more stocks.
Still mostly in cash but accumulate slowly. There is still some concern in my mind on the potential for more rate hike in China but the concern is partially balanced by value.
Buybacks - Not just Chinese companies. Not just small caps either. I remember days when APPLE, GOOGLE, Intel, MSFT .. all have money that can buy small countries, yet none of them give out dividends or initiate buybacks until their business slowed. Ooops, GOOGLE and APPLE still do not like to give back money to shareholders.
What I am tried to say is that CEOs have very different needs than day traders. Protecting their jobs maybe one of them, but seeing opportunities that we may not be privileged could be another.
I suggest to have some broad perspectives. If you start with an assumption of fraud you could see it everywhere. GOOGLE tried to buy a small company call Groupon for a cool $5BBBBBBBB. Must be some kind of fraud to enrich themselves using shareholders's money. For god's sake, Groupon was formed barely two years ago with $1m. LOL.
"Buybacks - As I've said before, Chinese companies don't like to give money back. Those cash balances represent power in China, and they also represent an enduring guarantee that a paying job will be available for management come hell or high water. Managements don't seem to want to give up either. Very frustrating."
There are a couple of reasons for CCME's weakness in turns of share prices. The shorts play a big role here.
I am not saying "Fraud or not" is not a subject for discussion. I am just saying we do not have to prefix it in our discussions. As I said before, if someone think it is a fraud, bring it on. Otherwise, we should not keep dancing to the tone.
PS. I am keep this topic alive just by responding . I will stop responding to this thread for 4 weeks. By then CCME will be at new high and another round of heated discussions will be initiated by the shorts. LOL.
SAIC vs. SAT -
What a surprise. Nobody knew that.
Wait, there are multiple people on this boards reached similar conclusion many posts ago.
I am more interested in empty building stuff than SAIC stuff.
"CEU - CFO saying SAIC are not reliable for Chinese companies, SAT are the numbers that are taken seriously, and (fortunately or unfortunately, lol) those are not publicly accessible."
Just curious why many of CCME discussions start with "not a fraud".
If someone think it is, bring it on. Otherwise why keep emphasizing it.
LPH - Don't you love analysts who recommend their stocks (and raise price targets) when PPS' are high and become sober when PPS' drop.
Gunnar - Great points here.
People need to be rational. The company's management has contributed a lot of time and energy to manage the stock price. While as investor/traders we would like them to do more, we should be realistic on our expectation.
CISG - 100M share buyback. Pre-market is 19.5, up 6%.
I do not follow this stock. Looks like it was under attack.
There is significant short interests (4.2M shares shorts). if the company actually buys, the short squeeze will be fun.
Settlement Date Short Interest Avg Daily Share Volume Days To Cover
11/15/2010 4,219,993 1,043,301 4.044847
10/29/2010 3,232,605 438,446 7.372869
10/15/2010 3,025,480 416,815 7.258568
9/30/2010 3,048,182 493,078 6.181947
----
CNinsure Announces U.S. $100 Million Corporate Share Buyback Program
GUANGZHOU, China, Dec. 3, 2010 (GLOBE NEWSWIRE) -- CNinsure Inc., (Nasdaq:CISG - News) (the "Company" or "CNinsure"), a leading independent insurance intermediary company operating in China, today announced that its board of directors approved a corporate share repurchase program authorizing up to U.S. $100 million in American depositary shares ("ADSs") repurchases by June 30, 2011. Purchases will be made from time to time on the open market at prevailing market prices or in block trades, and will be subject to restrictions related to volume, price and timing. CNinsure plans to fund the share repurchase program with its available cash balance.
Mr. Yinan Hu, chairman and chief executive officer of CNinsure, commented, "The share repurchase program demonstrates our confidence in the long-term growth prospects of the Company and our commitment to enhancing shareholder value. With a 12-year track record, our business model has proven sustainable and positioned us to take advantage of significant growth opportunities in the rapidly expanding Chinese insurance market. We believe it is the right time to use our strong financial position to invest in the future of CNinsure."
About CNinsure Inc.
CNinsure is a leading independent insurance intermediary company operating in China. CNinsure's distribution network reaches many of China's most economically developed regions and affluent cities. The Company distributes a wide variety of property and casualty and life insurance products underwritten by domestic and foreign insurance companies operating in China, and provides insurance claims adjusting as well as other insurance-related services.
http://finance.yahoo.com/news/CNinsure-Announces-US-100-pz-2325313212.html?x=0&.v=1
CEU/Short Attack - Lessons learned.
The CEU saga is continuing. So far, there were evidences that CEU could be fraud (like the damaging video showing empty classrooms), and evidence that CEU is a normal and very profitable company (its cash balance, easily verified, suggesting strong cashflow and viable business.)
Here are some of the lessons I learned when I read a short attack:
1. Do not assume that the short attackers will tell you the whole truth. Do not assume the management is not guilty either.
They are both financially motivated to tell you the half truth if possible.
For example, on the surface, the empty building video may nail CEU, but could also be "manufactured" easily. A person can choose the time/location/angles to shot and piece together a video that will present a visually strong but utterly false story. Ever heard of video editing, or photoshop?
For me to believe Kerisdale, it must do the following: 1). Explain the methodology. To prove there was no student, pick a time that the class rooms are most likely to be crowed with people. That means it should not be after the end of a quarter, nor on a national holiday/early morning/later night. 2) Show the video to the management and ask for an explanation, and 3) Publish the management's explanation together with the evidence, at the same time.
I am naturally suspicious when the shorts do not talk to the management before publishing any article.
2. Check some basic facts
Of course, this is a difficult thing to do. But in some cases, it could be easy.
In CEU and UTA's case, I went to their websites, and navigate through it. While I may not get the whole answer, I can at least get a feel whether the shorts were exaggerating or not. Or whether the company indeed has a viable operations.
3. Need to understand the business model of the company before jumping into conclusions.
You can easily build a case that Apple Computers are losing money on computers, therefore must be a fraud. You may laugh at this analog, but plenty of people believe that UTA is a fraud because its English site does not work properly. If you dig a little deeper, UTA's revenue is almost exclusively from its Chinese call centers and Chinese web sites. The English website has no relevance to its revenue and profits. Who cares if Apple is losing money on its computer (or not) if its iPhones, iPods, and iPads are flying off the shelves. While I wished that UTA has a better English site, I would not lose sleep if it does not.
It is similar in the case of CEU. Need to understand the whole business model of CEU, where do they make money, and how much the online elements contributed to the revenue.
4. Deficiencies do not equate fraud.
As a business consultant, I can tell you deficiencies in almost any blue chip US companies. I can also tell you that there are a lot of deficiencies in Chinese companies, especially the ones with high growth.
UTA's broken English site, or CEU's broken links on its website are definitely disappointing, but in no ways are proof of fraud. When I navigated through CEU's site, I found that they were trying to do too much, but I did not see fraud.
5. A stock under short attack could be a trading opportunities, whether it is a fraud or not.
I tends to buy on the long side after short attack, so far I have not lost any money by going long on those distressed stocks. Remember that all shorts need to cover, therefore the more shorts are there, the bigger the pool of buyers.
Disclaimer: Do not own any of those stocks as of now. Traded UTA/ONP/HRBN with some success. Had bids on CEU at 2.5 but did not get filled.
BIDU and Shorting Candidates
I would never short a stock like BIDU. For one simple reason: I would never expect an irrational market to become rational just because I think it should.
At this moment, BIDU is a story stock. Its PPS movement has nothing to do with technical charts or fundamentals. As long as the story is there (BIDU beats google, and google retreats), the stock may move up as much as it may move down. It is likely that for the next 2 quarters, BIDU will gain more market shares in the booming Chinese internet space while google continues to lose market share. Each news may propel BIDU higher.
The risk/award is not there to short it.
Rato - This is a very good summary for Chad's accomplishment.
In turns of SIAF, a collaborative management team also helps here.
CEU - it is too bad that my stinky bid of 2.5 was not filled two days ago due to the halt. Otherwise I could make a decent profit from this attack.
US China Index is up 0.93% as of now.
With 215 tickers in the index, there are 133 up, 70 down, 12 unchanged.
http://www.chinaplus1.com/content/performance-chinese-stocks
It is still below the market, but fares much better than the small cap index. Overall stocks traded in Sr. Exchanges fares much better than small caps traded in Amex/OTC.
CEU - While I am concerned with the training facility, the math in your post needed to be re-calibrated though.
Remember that CEU is for supplementary education training, not regular schools. The students do not stay in the school the whole day, they just stay long enough for the training classes.
Capacity for 1200 students means they have 1200 seats to host students at any given time.
Each seat can be used by different students at any given time.
In US, you can pay as much as $2000 for a 3 or 5 day training class. So it is not unusual for a Chinese training facility to generate $10K/year per seat. Those seats can be utilized at 7x12 basis (seven days a week, 12 hours each day.)
For example, if they hold 5 training sessions (3 by day, 2 at evenings) each day, that's up to 5x1200 students.
If you schedule the training sessions per MWF and TThu, then Sat/Sun, and you multiply the student population by another 5 or even 10.
Provided that they indeed have those students.
CEU - While I am concerned with the training facility, the math in your post needed to be re-calibrated though.
Remember that CEU is for supplementary education training, not regular schools. The students do not stay in the school the whole day, they just stay long enough for the training classes.
Capacity for 1200 students means they have 1200 seats to host students at any given time.
Each seats can be used the many different students at any given time.
In US, you can pay as much as $2000 for a 3 or 5 day training class. So it is not unusual for a Chinese training facility to generate $10K/year per seat. Those seats can be utilized at 7x12 basis (seven days a week, 12 hours each day.)
For example, if they hold 5 training sessions (3 by day, 2 at evenings) each day, that's up to 5x1200 students.
If you schedule the training sessions per MWF and TThu, then Sat/Sun, and you multiply the student population by another 5 or even 10.
Provided that they indeed have those students.
CEU - Kerrisdale Capital
As a matter of principle, I would never dismiss a report from a short, or a long, I would not truly believe them either.
I do cast doubts on all "research" reports, though. I built and ran a model of all analysts ratings from all major research firms: if you buy a stock based on an upgrade, and sell the same stock when there is a downgrade, you will have a lousy performance on your stock portfolio. It failed miserably comparing to a simple buy and hold strategy. I ran the model on NASDAQ 100 and DOW 30 stocks over a period of 2 years, five years, and 10 years. The result were the same.
Back to Kerrisdale, here are some "good" research from it:
http://www.marketfolly.com/2010/04/sahm-adrangi-kerrisdale-capitals.html
Kerrisdale spoke positively of DJSP, and recommended to buy it via warrants. We all know how DJSP turns out: it traded around $8 when Kerrisdale recommended it, now $0.58. The warrant holders lost almost 100%.
It speaks volumes about Kerrisdale's research ability to find fraud.
CEU - This is good info.
A ranking of 1818 in China's web traffic is actually very high, suggesting a viable online business.
As I said before, the actual damming part was the empty school. We will see if CEU comes up with a good explanation.
I submitted a low bid at 2.5 on the first day of the attack, which expired due to the halt. I will re-submit some stinky bids today.
Trading style
"As with any speculative investment I trade with 50% fundamentals and 50% gut. "
I was about 70% fundamentals and 30% guts for the last few years. But I changed my trading style big time this year.
Right now I am trading with 30% macro, 30% fundamental, 10% momentum, 30% guts. I am also reading and testing with trading systems and have enriched my trading technique using options.
For example, I would have been holding my CCME stakes if I had used my trading style two years ago. I truly believe CCME is a $30 stock with the potential of going to $50 within a year. However, this nice fundamental is outweighed by the negative macro environments and a loss of momentum for the stock. The down trend in SSE and US markets, rate increases in China, and persistent euro issues, as well as lack of dividends all played some role here.
As an alternative, I am using more defensive ways to hold onto CCME: I sold the stocks but bought some call options to preserve cash while maintain a stake on the upside. I also sold put options (meaning I am long) to generate the cash for my call options. If stock goes up, I pocket the cash from put options, and win on my call options. If the stock goes down, I lose a relatively small amount on my call options and will be "forced" to buy shares at lower net price per my put option (which I intend to do anyway.) If the stock trades sideways, I would be about break-even: losing on my call option but pocketing the cash from my put option.
BOWS - Messing with CCME you would find yourself in the wrong crowd on this board. LOL.
I am very interested in two numbers you mentioned:
1) PPS at $20: Why stocks with PPS at $20 would attract short attacks? Any empirical/statistical data for that? For the Chinese small caps, UTA got attacked around 5, ONP at 7, RINO at 17, HRBN around 22, AERL at ?, CHBT at 12, CEU at 4 etc. I did not see any pattern here, except that many Chinese small caps are easy targets due to barriers in culture/language/communication. Politics and racial stereotypes also play some roles here. Not to mention there are indeed frauds and corruptions in China.
2) You are "99%" sure that shorts are riding CCME buses and working on hit pieces. Is this 99% just an expression like "I am pretty sure" or you have inside information/informers tell you that a story is at working.
Just let you know that I am long on CCME although I only have very small stakes today (comparing with as much as 50% of my portfolio at one time, with Margin.) I do not mind a hit piece so I can rebuild my positions.
HRBN - 16.29.
Strong accumulation near the end of day.
CCME/Short attacks - poor you. If you have not made so much from CCME I would donate my lunch money for your psychotherapy.
"Everytime I see a dump on one of our stocks the first thing I think is that some Short article just broke and I go running around looking for it....I think i'm permanently scarred now...."
I am sort of short-proof now. To me all short attacks are potential trading opportunities. I have not lost any money by going long AFTER those attacks. I credit the shorts for two of my best trades this year: UTA/CCME. I also made some lunch money in quick trades on ONP, HRBN, and CHBT.
The only stocks under short attacks that I have not being able to make any money are RINO and CEU - because I have not traded those two stocks yet. .
ONP - Joe - If you bought the stock at the time of complaining the lack of available shares to short today, you would be making over +15% now. If you shorted today (not yesterday), you could be -15%.
BTW. I do not have any ONP shares. But I do own some hedged options (straddle) that could win as long as the stock moves, either up or down. I think the ONP stock should go up by itself but the market (SSE/Euro issue) is dragging down most Chinese small caps.
ONP - back to green now.
MCOX - crazy stock. The rev/net tripled and PPS got halved.
The PE ratio is high (too high for me). But it was even higher before the earning report. Wonder why such a sell off after earning.
CHBT - Got some Dec 12.5 calls at 0.2 today. It is pretty strong over the last few days.
CEU - Just looked through the first video and glanced through the report.
Not sure what to make of it. The first video talked about payment methods using the same tried and failed attack technique used by CITRON on UTA. Not a very valid attack.
CEU's website detailed valid payment methods. The demonstrator was not using any of the correct ones. The failed payment is more about the ignorance of the user than the website.
http://translate.google.com/translate?hl=en&sl=zh-CN&tl=en&u=http://www.edu-chn.com/service/fukuan.htm
The site visit of empty hall seems more damming. However, I am not sure about the timing of the visit. If it came just after the National College Entrance Examination in early summer, then there are innocent and natural explanations about the empty hall. Otherwise CEU has some explanation to do.
ONP - I would not call a stock of PE of less than 9 "beyond fully valued".
True, you may give a standard response that there are other stocks with even lower PE ratios. This does not mean shorting is a good idea. It is more risky to short than long at this price point.
ONP - nice summary report. Wonder if ONP is going to sue MW.
The only possible explanation is that IBD editors (or those who bankrolled them) are shorting the stock .
Seriously, there are two kinds of ratings - computer generated, based purely on algorithms, or human edited. IBD seems to be a hybrid, with discrepancy can only be explained by human greed.
SSE - Happy Thanksgiving
Shanghai composite is up nicely during the thanksgiving day.
2898.261 +1.34%
TSTC - Agreed here. This is a poster boy of a great company with a tough to scale business model.
I almost wish they can get bought by a deeper pocket company such as Huawei of China or Cisco from US.
Alternatively, they should work on their business model. Maybe they can get a bank or a large PE firm as a revenue sharing partner to jointly bid for projects. TSTC provides technology/project management and financial services firm provides the upfront capital. The revenue/profit is shared between them. This will make TSTC more scalable and free the CEO from constant needs to raise capitals.
You certainly know how to make a point .
It happens when the server is slow. I wish there is a self delete feature in iHub.
Yesterday.
Let me say you are a brave man. Certainly braver than me.
Judging from today's early price action, your buys are doing fine.
I made some small purchases yesterday.
2K HRBN
1K CCME (first buy after earning).
However, I am still about 75-90% cash in all of my 3 accounts. The market is just too volatile for me to bet in one or other direction over the next two or three months.
"Yesterday I went to 0% cash and bought.. "
TSTC option.
Just submit a bid for Dec 12.5 options. Considering that's my holiday trip to LV (or shall I say Macao with AERL?)
PS. Got partial fill of 6 contracts at 0.5 while I am typing.
HRBN - Nice rebound today.
Just locked some profit from my second buy in the low 15s yesterday. Still hold my 16.30 buys.
Just read that "Harbin Electric sell-off creates attractive entry point, says Global Hunter". Does anybody have the full report/analysts note?
Margins High and Low
1. Your personal story (about your Dad) seem to contradict my personal experiences dealing in China, especially the insultive part. However, China is huge country, I am sure it could be true somewhere.
2. Margins high and low.
- Margins are extremely low in China's manufacturing sector for commodity type of goods. This is the area that your Dad was somewhat familiar with. There is one simple reason for the low margin: competition. There could be a second, called Wal mart pricing. Basically Walmart squeezes margins from each of its suppliers every year during the contract renewal.
- Margin in many other sectors, however, are different. Some are extremely high. For example, property developers enjoy such a nice margin that millionaires (and billionaires) are created overnight. I personally knew with a few of them. The high margin also extends to luxury goods, high end restaurants and spa, and almost anything "new" before the competitors crowd in.
3. CCME is in a almost "monopoly" spot. If you know about Chinese advertisement, you know it is a highly lucrative area. CCTV, the largest TV station in China, is basically a money printing machine. Its ad rate increases at 15-50% year over year for the same TV spot.
4. Interestingly, the margins in ads are high partly because the margins in manufacturing are low, and everyone with goods to sell tries to reach to the consumers.
Nice analysis.
Those are exactly the rationales why PE are interested in taking firms private.
HRBN - Rato, I am OK with any negative article emphasizing the RISK aspect of the deal. There is a good chance that deal will not go through, that's why you can buy a $24 stock at a price of $17 last Friday. The risk premium was obvious here.
But publishing negative articles after articles saying basically the same thing at the same day, mostly based on speculation? That smells.
It makes this board more and more like Yahoo boards.
Even today, when you are "right", you forget to mention the other side of the story:
1). Per Roth Capital: "Exclusivity agreement amended to comply with Nevada laws."
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=57011374
2). The letter was amended per request from HRBN's CEO, not necessarily because of Baring's cold feet:
See Baring's letter as part of the SEC filings:
"You have informed us that you now intend to seek alternative financing for the Transaction . Accordingly, we hereby agree that Baring will not participate in the Transaction, except as set forth below...."
"http://secfilings.com/searchresultswide.aspx?TabIndex=2&FilingID=7574381&type=html&companyid=599937&ppu=/default.aspx%3fticker%3dhrbn%26amp;auth%3d1
3) As Roth pointed out, Morgan Stanley and Goldman Sachs are still involved in the deal.