This is my first post and want to get some opinions on FUQI. Any thoughts would be great.
I’ve been watching this one for a while and believe there could be a big asymmetric payoff here. When FUQI made their announcement to adjust their COGS back in March, they gave Q4 2009 guidance that would cut EPS by about 50% for the quarter. The stock dropped from about $19 to $10. Shit hit the fan in the global markets in May and China just decreased their growth figures. However, this company is a leader in high end retail jewelry sales and distribution. NASDAQ has given them until September 28 of this year to submit Q2, Q3, and Q4 2009 10-ks and they have stated that they will distribute 2010 10-ks after they complete their 2009s.
Competitors are trading at 20x earnings and FUQI is in the low single digits (I realize this is likely on ‘bad’ financial data, but I think the point can still be made). Additionally, management’s compensation seems to be tied to the success of the company, as represented by their insider holdings.
The short float is nearly 40% of volume. I’ve notice that as the short position increases, the call volume has increased on the Julys as a hedge. If you read most of the commentary from the traders, they are listing technicals as reasons to buy or sell. However, I think this is a little more black and white. Either FUQI is creating fraudulent financials to screw investors or by September 28, this stock is likely to make a solid jump.
Therefore, my investment thesis is to purchase the longer dated calls and make bets that FUQI will release 2009 10-ks and 2010/2011 guidance that will move FUQI in the $10-$15/share range. Does anyone have any thoughts? Obviously bad financials make the analysis murky, but at lease they gave some guidance back in March and I know they need to have their shot together by September 28. |
