Its simply a matter of probability, Suntzu. I use as many sources of information as I can get (long or short). Many people are now doing on-the-ground DD on companies -- The ones that come back positive with that OTG are MUCH less risky than others and yet are trading at similar multiples around 2 (CCCL for example). That 'baby out with the bathwater' creates opportunity to find gems among the rubble.
The sentiment is so negative right now that it is very easy to write off every single Chinese company forever -- But frankly that will mean you will miss out on HUGE money making opportunities in the next 12 months (IMO).
I read the CHBT attacks from a LONG time ago and would not have touched it with a 100 foot pole. I hated SCEI in 2009 for their dilution and it did not surprise me at ALL that it had big problems. YUII surprised myself and even Geo! (They were doing DD to go long it).
Nothing is 100% safe but you can try to minimize risk. When the potential upside is so large, it is worthwhile IMO. This is not to say anyone should invest all their money on these companies, for gods sake -- But sprinkling money here and there on attractive risk/reward situations backed by on-the-ground DD seems smart to me.
I own YONG for example -- But I certainly have not bet the farm on it. I simply like the risk/reward -- People just can't forget that EVERYTHING has risk (not just Chinese companies), investors just need to be able to manage it properly.
I have not given up on UTA at all btw, they got their 10-K out and the website alexa rankings (and google website trends) support their business is significant and booming. Certainly a risky name but also not a proven fraud in my mind.
The way I protect myself against 'space' weakness is by going long a few companies I like and shorting others I do not like. That way you are protected if the entire space gets cheaper (ie: more baby out with the bathwater) and still have attractive entry points in the names you like.
-Fernando
