Harbin HRBN $20.34--Results were reported Monday. They soundly exceeded estimates as they have for many quarters in a row.
Harbin remains our co-largest individual [stocks] position and is very undervalued given their growth and likely future growth.
One of the best situations out there, [value to prospects], that we are aware of at this time.
Still, bad vibes towards all China S.C stocks remain and will continue to act as a headwind, until the market finally realizes it's way over discounted the effects of China tightening on the future earnings of companies like Harbin.
As we've been saying for 6 to 8 weeks. That headwind will likely remain for quite a while because China is closer to the beginning of it's tightening cycle than the end.
In the short run, it's again abundantly clear that mass psychology determines prices, not value or future prospects.
Patience will pay off and one can use the current sour psychology to large long term positions that we believe will pay off big.
Harbins earnings were expected to be $2.28/sh this year.
Harbin should earn closer to $2.50 a share this year which puts the stock at 8 X earnings. Analysts expect 25%/yr growth the next 5 years.
That puts the PEG at a very tasty .32 with fair value being 1.
We assume no more than 20% growth in eps for any company we own including Harbin and see if it still makes sense.
Using 20% growth, HRBN has a PEG of .4 and is IOHO, very undervalued. Again though...the market could give too hoots and a gay goat right now.
2 or 3 years? Harbin should be higher by a factor of 2 or 3 X.
When the market doesn't like them it's the time to go Elephant Hunting.
We are after those future elephants that make for huge profits.
Those doubles, triples, 5 baggers are the way most investors can do really well. The elephants are how many of the worlds wealthiest individuals have gotten that way.
It sure is not trading which for most is a road to mediocrity in returns. [with due respect to our trader friends and that includes us as we do a fair amount of trading on the side].
Ending up with big Elephants is not as easy as one would think.
It requires holding through both downside and upside volatility that for one with good trading instincts, can be hard to not play. [so many times we see that one of our long term holdings is likely to pull back and yet we must sit with the vast majority and let it happen. Its really hard to do that but do it one must because if one starts trading for the decline with the idea to buy back cheaper...one will NOT-take it to the bank guaranteed, not have their full large position left when it becomes that big elephant. At most, one should gradually build a very big position in their best prospects and then after it is built, trade maybe 10 or 15% maximum for the in and out sell and buy cheaper trades and even then, only when it looks unusually compelling to do so which may happen only once or twice per year. Please trust us on this one. The sell and buy back cheaper even for an elephant hunter with good trading instincts and chart reading ability on the side...will backfire. It's only a matter of when.
Long term big winners requires a ton of patience and patience is the one time tested virtue that few have time for anymore. Still, it's as true today as it was before computers, computer trading, and the internets. Gunning for, cultivating, and holding for elephants is still the most effective way in the markets to make big money. Shortcuts are the fast way to mediocre returns and those shortcuts remain the rage in the age of instant. Fools Gold.
Fabian
Harbins EPS were +69% vs. 1 yr ago
Minimim fair value assuming 20% eps growth is right now $50/share
HRBN-
UPDATE 1-Harbin Electric Q1 tops Street; shares rise
Mon May 10, 2010 9:04am EDTStocks
Harbin Electric, Inc.
HRBN.O
$20.34
+1.81+9.77%12:00am PDT
* Q1 EPS $0.66 vs est. $0.49
* Shares up 13 percent premarket [remember, this was pre market Monday]
May 10 (Reuters) - Harbin Electric Inc (HRBN.O), a Chinese maker of electric motors, posted better-than-expected quarterly results on strong domestic sales growth, sending its shares up 13 percent in premarket trade.
For the first quarter, Harbin's net income was $20.6 million, or 66 cents a share, compared with $8.7 million, or 39 cents a share, a year ago.
Revenue more than tripled to $105.5 million.
Analysts were expecting earnings of 49 cents a share on revenue of $98.7 million, according to Thomson Reuters I/B/E/S.
"We exited the quarter seeing continued strength in demand, setting us up nicely for the seasonally stronger second quarter," Chief Executive Tianfu Yang said in a statement.
Shares of the company were trading up 13
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