Replies to post #41 on China Stocks

[ratobranco]

It's a valid point, and you do need to be more careful. But there are a lot of strong reasons to believe that they are legit.

First, they are not raising money. If they are not raising money, what motive do they have to lie on their earnings? It all goes away right there.

Notice that essentially *every* company in the RTO space has some sort of fundraising plan. Without fail. Even when you think you've found an exception to the rule, they come out and surprise you. There is a reason for that. The purpose of the RTO itself is to raise money to build a profitable business, and to potentially funnel some of the proceeds out of the company to enrich shareholders. The financials are a front to get stupid Americans excited and lure them in.

Third, their chinese filings almost always match. This has been tested by numerous shorts (Mushman, CCA) and reliable research groups like GEO. That's huge. The fact that these guys consistently tell the truth on their filings, and that the RTO garbage consistently lies on those same filings, gives you reason to think you are dealing with an entirely different beast here. And you are, no doubt about it.

The best non-RTO play right now IMO is CNTF. They are cheap, they have cash, and their business is thriving. I'm not necessarily a buyer after this move, because I think the markets have topped, and everyone will suffer. But I have my eyes on the name.