The Long Case for American Oriental Bioengineering

These are notes from the Day 1 sessions at the 3rd Annual Value Investing Congress West, being held May 6-7, written by Jonathan M. Heller.

Zeke Ashton, of Centaur Capital, opened with some observations of some of the things that we, as value investors, think we should not do. Among them:

• Don’t sell short
• Run concentrated portfolios
• No leverage
• Buy and hold
• No technology companies
• No stocks with commodity price risk
• Must accept high volatility
• Don’t use derivatives
• If Warren wouldn’t do it neither should you.

Zeke’s point was well taken: We often become so beholden to the concept and textbook notion of value, that we tie our hands in the process, leaving opportunity on the table. Ashton also made the case for utilizing covered call strategies in our portfolios, in an intelligent way.

His favorite idea was American Oriental Bio (AOB):
• $733 million market cap, $130 million cash, $603 million EV
• Fast growing manufacturer/distributor of pharma/nutritional products in China
• Continues to acquire small, undercapitalized Chinese companies at bargain prices
• Despite recent bad press, China risk, high short interest, Ashton believes fair value is in the $15 range,

Comments

[investorslive:]

AOB nice breakout - heres the chart

www.investorslive.com/.../

2008 May 08 10:21 AM