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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Mico Martinez who wrote (47149)	3/23/2012 9:43:03 AM
From: Jurgis Bekepuris	Respond to of 78666

Chinese fraud risk.

To: Mico Martinez who wrote (47149)	3/23/2012 10:21:20 AM
From: grahamcracker	1 Recommendation Respond to of 78666

Re: What do you guys think about <<Why is it trading at a really low price?>> It looks like they recently guided down for the year, to the surprise of some analysts. Pork prices are off and this is apparently significant to their profitability. Of course, if this is truly a solid company such reasons for price declines are a value investor's dream and I have made most of my money on companies with good long term histories and poor recent short-to-medium term results. See MCD in Q1 2003. The Motley Fool piled on to the pack that wrote off the company that invented fast food just as the price went under $15/share (as I recall). I read a lot of huffing and puffing about how Wendy's at 6% market share was eating McD's lunch (ha, ha) at 50% market share. McD's subsequently released several hit new products and the rest, as they say, is history. It was very similar to analysts writing off Coke at a time when Coke still had 6 of the top 10 drink products as Pepsi made all sorts of noise and the book "How Pepsi Won the Cola Wars" was released. All this said, every time I see a Chinese company that appears to be a great value, I immediately start to wonder when that company that exposes Chinese sham companies will release a photo of an outhouse that's carried on the balance sheet as $1B worth of real estate. It's unfair, but there are so many scams it's hard to sort them out. I think that this, and to a greater extent, the speculative general expectation for Chinese companies has conspired to whack the price. If you can confirm that the company's reporting is accurate, this looks like a pretty good situation for a value investor.

To: Mico Martinez who wrote (47149)	3/23/2012 11:06:46 AM
From: Paul Senior	3 Recommendations Read Replies (3) \| Respond to of 78666

My assumption is that almost all these Chinese companies are frauds on the face of it, or fraudulently run. I've got the scars from purchases of maybe 15 of them to remind me of that. If my experience is typical, it's going to be difficult to get speculators/investors to get back into the Chinese market when there's no evidence that foreign investors can rely on financial reports or Chinese laws/regulations. So some of these "value" stocks may just languish. In my experience, everything looked good -- p/e, roe, cash, debt, sales -- yet there's nothing that the investor ultimately gets other than creamed as the truth comes out. My feeling is that the people running these companies will eventually go to the next higher level of fraud -- give "investors" something to draw them in so as to prop up the stock price while the fraud continues. And that would be a cash dividend -- if the real company owners haven't siphoned the cash off the books yet. I'm guessing the Chinese managements haven't wanted or needed (or been able) to institute a dividend, and so any Chinese company that now actually does share some of the profits with a cash dividend to small investors might be looked at as 'possibly' legit and maybe a possible speculation. For me, I only hold one mainland Chinese stock -- and it's just a few shares as a speculation -- XIN. finance.yahoo.com