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

To: MCsweet who wrote (51323)	5/10/2013 1:53:41 PM
From: MCsweet	Respond to of 78774

Following gcrispin, I'm going to go out on a limb here and propose CNET as a speculative buy. This is a Chinese media/advertising company with an announced buyback, PE of 5, and selling well below book. My thesis is that a good buyback program on a low liquidity stock with cheap fundamental ratios will work out well in the short to medium term. This has played out in XIN and CCM. It has not played yet out in GAME, although arguably its fundamentals are shakier. Anyway, it still has worked out quite well overall. Looking at the CNET annual report, I was very disappointed by lack of buyback progress, but from the call it appears they were restricted signficantly by blackout dates (which happens to restrict this company more than most becuase they always get their earnings out so late). In the call, they announced that they are going to put in place an automatic buying program, so they aren't restricted from buying all the time. Also, there was good amount of insider buying last year. Why I deem this quite speculative: 1. CNET is a Chinese smallcap with difficult to understand corporate structure including VIEs. So there is both fraud risk and risk from the corporate structure of self dealing and simply the notion I may not own what I think I own. Therefore, I cannot say this is a solid investment because there will always be uncertainty hanging over the stock from these. If someone decides not to buy for these reasons, I really cannot argue with them. 2. This is a reverse merger. My prior investment success stories -- XIN and CCM IPO'ed on the NYSE and thus had an extra due diligence process. On the bright side, short interest is low, so at least this is not a no-brainer scam picked up by a short hedge fund. And the insider buys give me some measure of comfort. I am hoping the buyback thesis to play out in a relatively short time period (i.e., next 3-6 months starting late May). Because of the greater uncertainty, I wouldn't be comfortable holding a large position over a long time period. MC PS: I am out of CCM and XIN, by the way, so don't take this as a recommendation for those stocks.