China Stocks

Posted by: Dr. Ge on June 10, 2006 10:41 pm | In China Stocks | 9 Comments |

Being a native Chinese myself, I am always amazed by how enthusiasm the American investors are toward China and China stocks. Following Peter Lynch’s teaching “invest in what you know”, I should stuff my portfolio with tons of China stocks. But on the other hand, because I do know the culture and some of the companies so deeply, I am very hesitant to commit my hard-earned capital to those companies that are selling the theories of 1) China’s 1 billion consumers; 2) China’s 100 million Internet users; 3) China’s 10% GDP growth rate.

The only China stock that I ever invested into is CNTF. I bought in the $10s and sold in the $15s. My advice to non-Chinese investors: be very careful and always critical to the selling stories. Before you commit your capital, you need to consider

1) The information asymmetry risks – A Chinese like me can gather a lot more information about a China stock than you do because I can read Chinese and I have a lot of contacts and information sources there;
2) Political risks – you never know what’s going to happen;
3) Regulation risks – the best way to describe China’s business environment now is: there’s no rule and there are many rules – the same rule can be a non-issue or can be a business-broken issue depends on who you are and what connections you have;
4) Ethical risks – I simply don’t trust the accounting. It’s an open secret that many Chinese companies maintain 2 or 3 books. Corporate governance is still an alien word.

The true growth engine in China is the small and mid size private enterprises but very few will ever grow to world class enterprises. Therefore, most investors here will never have any chance to capture the reward of China’s 10% economic growth.

China Techfaith (CNTF) – hit my target of $18 today!

Posted by: Dr. Ge on December 1, 2005 5:39 pm | In Long Ideas, China Stocks | 4 Comments |

I have to admit that the stock CNTF behaves way beyond my expectation. I might be among the very few people in the world who believed CNTF’s potential when the stock was $8. I gave a “sky high” price target of $18 because I thought that’s what the stock’s worth. Amazingly, the stock reached my target from $8 to $18 in a short 3 weeks.

Since the stock has become a momentum stock, it’s not my area of expertise anymore. My expertise is to identify deeply undervalued, temporarily out of favor stocks. I know when a stock is undervalued but I don’t know much about how a stock will move on a day-to-day basis. I’ll leave that to those people who believe in so called technical analysis, trend trading tools, make-money-quick schemes, etc. whatever you call it. So this is my last post about CNTF. Enough with it unless someday in the future it becomes a value play again.

Congratulations to everyone who bought CNTF after I listed it as a value play in September. It’s a tough run initially but ultimately yields very generous profit. Well, if you hadn’t bought it, blame yourself, your wife/husband, your in-laws, but don’t kill yourself. You’ll find many other opportunities by reading my blogs regularly. Share my blog with friends who you truly love (in contrary, share other make-money-quick trading blogs with someone you really hate )).

Good luck and thanks!

China Techfaith (CNTF) - Sold

Posted by: Dr. Ge on November 30, 2005 9:55 pm | In Long Ideas, China Stocks | 1 Comment |