In case anyone wonders, here is a follow up of mine on Chinese microcaps from last year, which I said basically to avoid unless you have strong confirmation that the company is legitimate.
Here are a few questions you might ask yourself:
What is your competitive advantage in Chinese microcaps? How do you know which ones are legitimate versus which ones are scams? Are you the most knowledgeable about these companies of all the current and potential investors? I can't truthfully answer yes to these, so I stay out of most of these stocks.
Warnings signs:
1. Stock is ludicrously cheap (PEs in the 2s, etc). Are the company managers that dumb they wouldn't invest in their own stock if they believed in the prospects? No, these guys are smart. If it looks too good to be true, it probably is. One possible exception is in an economic crisis when even reputable companies can sell for cheap as institutions/hedge funds are forced to liquidate large positions.
2. Company issues stock at 52-week lows, way below book/cash with great earnings, etc. Again, it is either a scam or the owners care so little about you (diluting you at huge cost), why would you want them to continue managing your money?
Granted, you might miss out on a 10-bagger as speculative fever takes these stocks up, but I am not big on greater fool investing.
I am tempted by GFRE, however. It seems to me to be a legimitate company and, if it is, I think it is a buy. If anyone could help convince me of that (not sure you can, but would love to hear input), I'd be buying it here.
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