Replies to post #28493 on China Growth Stocks

[RyanW439]

CFQCF/CFQWF - Steel, you know I've been a big proponent of these warrants for quite some time. Nothing has changed on that... What has changed is my stance on speculation versus defensiveness, mainly due to looking around and seeing so many "non-speculative" issues selling for so cheap again.

While I agree that there isn't much out there that has a chance to triple in the next week, nothing I own has much of a chance to drop by 80-90% in the next week either (warrants won't go to zero, because they still have time to readjust the deal or find a new acq. target).. I think where me and you are at a disconnect is that IMO, even if the deal goes through, there is no guarantee that the warrants will suddenly trade up to the share price (current intrinsic value). If you followed TMI/CCME warrants, they remained at a significant discount to the shares post-merger, and only until the warrants were called for redemption did the intrinsic value gap close, which wasn't an upswing in the warrants, but rather a fall in share price. Now there is nothing to say that CFQWF/CFQCF will react the same way, but my point is that it's not nearly as attractive as the CCME deal was at the time, yet that was met without nearly the positive reaction all were expecting. CFQCF is a much more capital intensive business, with lower margins, and if all warrants/shares remain intact post merger, the commons are not all that cheap (P/E of ~11).

You're looking at a stock that's likely to have 16.8M shares fully diluted, expected net income of ~12M, so it's going to be somewhere around $.70/EPS. My guess is initially, it's going to be met with some selling pressure on the stock as opposed to buying pressure on the warrants.. I'll happily sit on the sidelines and take a wait and see approach. I'm being a bit more defensive than I was a few weeks ago, and have eliminated all intensive speculation from my portfolio..

All that said, Wowjoint is in a honey-hole of an industry in the PRC and I expect it to see significant growth in the coming years. I just would rather see how the vote goes and see what kind of price action we see in the near-term. If some of the stocks I bought at the recent discounts have a run-up this week, I may change my mind and increase my appetite for risk prior to the upcoming meeting..