Replies to post #16355 on China MediaExpress Holdings, Inc. (fka CCME)

[Must Be Patient]

totalljones, I urge you to re-read my post. I was referring to the timeless phenomenon of a market undervaluing an asset and then realizing it later and "catching up" with fundamental valuation. This was a response to a query on how cheap China growth stocks might reach higher valuations. I did not say anything specific to CCME; you added that...

I've been investing and trading for a while now, and I can assure you that the market can be irrational for quite some time. My favorite example is BBI and BBI.B -- for years, BBI.B traded at 50-70% of the price of BBI, yet they represented identical stakes in Blockbuster. The point here is, don't assume that the market is rational, or that it will become rational according to any specific timetable. In my view, that pretty much precludes using any margin unless you both diversify and use stop losses.

If you didn't find my psychological analogy relevant, I urge you to put forth a better one.

[eyedoc]

My medical background calls this the risk/reward ratio, here it is basically risk tolerance. Looked at short term this has been and will continue to be a rollercoaster ride. If you've ever watched a tug of war with about 20 people on each side, that is what you are witnessing here. One side takes control and pulls it severely one way, then the other gets organized and pulls it back. This sector of stocks is not for everyone. Each of us does our varied degrees of due diligence and then takes our shot. Some with less risk tolerance put in stop losses to control the downward pain somewhat. Of course you could end up picking the bottom getting sold out and watching the stock ratchet back up. Others do no such thing. Others protect with options as a sort of insurance. All comes down to risk tolerance. If these scenarios keep you awake at night or prevent you from functioning normally at work choose another investment. You must understand we have almost no control short term on where this stock goes. Management can tampen some of the effects but has shown little inclination up to now to do that. Decide how much of this tumult you can stand and act accordingly.

[rru2s]

Tootalljones: My perspective is a bit different. I've been in several different CGS stocks and I am well aware that ANY stock can be attacked. In particular, the hard-to-understand business model of CCME's advertising margins made me skeptical way back last summer. But over the course of the fall and winter I read a lot of good due diligence on CCME and was impressed with what I saw. However, I still didn't make a first buy in the high teens/low 20s because I had a hunch that Mr. Market could create selling pressure in the event of either negative macro sentiment or a short attack on CCME, even given that this stock is in the cream of the crop as far as well-vetted China stocks.

Therefore, I made a first buy AFTER the short attacks had brought down the price, since at that point short term AND long term risk-reward both looked favorable and pretty safe. As far as those who bought high well before the short attacks, they need to remember that investing horizons will always vary, and you haven't lost money until you sell. Therefore, almost all short attacks that are completely lacking in substance and which are successfully refuted will have waning residual effects that do not last for much more than a few weeks to a couple months. A very undervalued stock with a solid reputation like CCME will eventually recover and surpass previous highs if it is truly solid and has growing earnings without excess dilution.

However, that notwithstanding, there will always be a "risk-premium" built into the valuation assigned by the market for US-listed China stocks, so you really cannot ever expect P/E to fully approach that of many of the typical comparable US companies. JMHO. GLTA.