ZSTN - "let's face it, a lot of these cos. came to the U.S. exchanges to raise money for massive expansion plans"
That's what they're telling *us* Value.
But then we go take a look at the company, we do the DD, and we find out things that they wouldn't dare disclose. The SAT filings don't match. Nor do the SAIC filings. No one can find their products. They don't know who their competitors are.
It's not clear what they even do. They don't manufacture the equipment, and they don't own the technology. So at best, they are a glorified middle man that routes orders between manufacturers and designers. And yet they garner 10% margins?
Everyone should read that Axler article again. I think this is a fraud, point blank. And I think that people need to be defensive in this space. It's all about china-based DD, and it appears that people are buying heavy into this space relying only on reported SEC financials. You *can't* do that IMO. That's not effective DD, it won't cover you. You're not going to get the real truths about earnings and the like.
My take: don't put hardcore money in this space unless (1) you know what you're buying on the level of actually having access to real China-based DD, checking and verifying company claims on the ground, or (2) you have strong reasons to believe that the company is legit based on other factors, as you do in the case of CCME for example. And I mean strong, not just "Oh, it looks like a solid name." That's what I thought about many of these names at first. But then truth seeps out.
CCME has a top 4 auditor, massive operating and net cash flow, no capex in which to hide transactions and costs (no multi-million dollar "Inner Mongolia" or "greenhouse facility" land purchases), huge insider buying, plenty of scrutiny yet nothing negative found by any shorts, multiple confirmed channel checks--and I can attest to that, because I've had channel checks come back positive from like SIX sources on CCME already). You can buy that with some confidence, but ZSTN? Hell no. It's just asking for an eventual goose egg in the portfolio IMO.
