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  • CafePress's Depressed Stock Price Presents Opportunity [View article]
    Hey Whopper, thanks for the write-up. Do you know why they reported only having $51.4m of cash and cash equivalents as of March 31, and not the ~$70m expected? They have the $4.8m in restricted and made short term investments of $6.6m, but there seems to be ~$10m missing. Maybe they paid taxes on the sales?
    May 13, 2015. 10:42 AM | 1 Like Like |Link to Comment
  • Greystone Logistics: An Undervalued Stock With Considerable Optionality [View article]
    I think Dan67Bird is thinking of the credit the right way - the $3.5M per year of purchases by GLGI would really be in the steady state, but we have not yet reached that point where 10-15% of pallets have reached the 7-10 year age. GLGI is currently selling MillerCoors a new design of keg pallets, which are not replacing old GLGI product, so the average age of the pallets in the MC pool is younger than in the steady state.

    Also, the credit varies per pallet (a range of $10-20) depending on the weight of the plastic, so the $15 per pallet is just the midpoint, and it could be that the ones GLGI has bought back so far have been closer to $10.

    In emailing with Mr. Kruger, he made it clear that MillerCoors does not have a put option on the pallets -- it cannot receive the return credit unless it is replacing the pallets with new GLGI ones.

    Even if the total asset to MillerCoors ended up being closer to $15M than $30, it would still be significant and would certainly help to discourage MC from looking elsewhere for pallets, along with the other reasons we list in the write-up.
    Aug 13, 2014. 01:59 PM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]

    Sorry for the long wait on the reply for this, finals season caught up with us a bit. We couldn't find much more on the Longtop issue specifically, but we did discover that Gurnee is also Chairman of the Audit committee at Elong (LONG) a very well respected travel site in China. Elong's stock price reflects no perceived stigma from this relationship (its at a pretty healthy valuation), and we see this as a sign that Gurnee isn't toxic at all as some have feared. In addition, we were very heartened by the filing of the company's fully audited 20F and divided announcement recently. There was far more stringent oversight this time after the embarrassments for Big 4 firms in China last year, and in my mind that significantly lowers the (already low) risk that XIN is fraud. Its impossible to be sure, of course, be all signs point to safety at this point, though we'll remain vigilant and have no problems with publishing a mea culpa if we end up having been wrong. Thanks!
    May 7, 2012. 10:31 PM | Likes Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    We've done some digging on Mr. Gurnee, and we don't agree. Sure, the LongTop Financial situation is a cause from some concern, but the market doesn't seem to be treating it that way in the case of another company where he is (and has been) chairman on the auditing committee. ELong (LONG) trades at a forward P/E near 20 and the P/B near 3... it doesn't seem like the market is factoring in any chance of that concern being a fraud based on his position as auditor. We'll keep doing research on LongTop and any role Mr. Gurnee had to play, but based on the trading of ELong it appears the market thinks he is clean. We agree.
    Mar 29, 2012. 03:50 PM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    Actually, you're wrong. Our portfolio is listed on our website, you can see it here:

    And you'll find that XIN is very much still a part of it. Also, you should notice that our article directly deals with the risk of fraud and explains why we think fraud is unlikely in this case. Are the examples of smoothly perpetrated frauds by stocks with similarities to Xinyuan? Yes. There are also dozens of U.S. traded Chinese companies that (as of yet, of course) are not frauds. As you'll see if you read our disclaimer, nowhere here are we proclaiming with certainty that XIN is legitimate, only that we think that the market is vastly overestimating the odds it is fraudulent. As we mentioned above, if our research eventually proves otherwise, we will sell and post the information here with a mea culpa for the world to see. Until that point, we're holding.
    Mar 29, 2012. 03:06 PM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    We haven't chosen to ignore the Gurnee connection to an exposed fraud, actually, though we weren't aware of it until it was brought up here. I'm working to speak with him about it, if possible, but while you're right that it is a red-flag it is not a slam-dunk by any means. As you've said, auditing companies have been fooled by these frauds before, so I won't rush to judge Mr. Gurnee as the wool may well have been drawn over his eyes as well, especially since his credentials and other work experience don't scream fraudster:

    "Mr. Thomas Gurnee has served as an independent director and chairman of our audit committee since January 2007. Since 2004, Mr. Gurnee has served on the audit and the compensation committees of eLong Inc. Mr. Gurnee has been the chief financial officer of GEM Services Inc. since 2006. Mr. Gurnee was the president of Globitech Inc. from 2001 to 2005. From January 2000 until December 2000, he served as the chief financial officer of, and served on’s board of directors and the audit committee until 2005. Prior to joining, Mr. Gurnee held several senior positions with Chartered Semiconductor Manufacturing Ltd., including president (North America), chief operating officer (Singapore) and chief financial officer (Singapore). Mr. Gurnee also spent thirteen years with Schlumberger Ltd. in various senior finance positions. Mr. Gurnee received a Bachelor of Arts degree from Stanford University and an MBA degree from Santa Clara University. "
    And on the auditors, again, the recent spate of frauds has of course made them more vigilant (as it should have) about publicly traded companies in China than they were before. Of course they still won't be perfect, but they are smart people and surely realize the potential for fraud in these sorts of companies and will do their utmost to discover it as the lawsuits and bad press can be very damaging.
    Overall, we're with Whacko (though the name doesn't inspire much confidence) and the company on this one at the moment. Xinyaun is being declared guilty of fraud by association, with the only remotely tangible link being the CFO, who other than missing an extremely well executed fraud at Longtop has a spotless record with many major companies and little incentive to be complicit in fraud (as he almost surely would have to be as CFO). Also, the company's activity still shows few trappings of fraud. No related party transactions that can be found, no issuance of new shares of stock (buybacks, on the contrary), no evidence to be found on any of the numerous blogs/websites following Chinese frauds, etc. That said, we will continue to aggressively pursue more information about the company through all channels possible and post what we find here. We are far more concerned about being correct than being consistent, so if we find evidence that leads us to believe XIN is a fraud we will let the world know. Thanks for the feedback!
    Mar 29, 2012. 12:48 AM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    Your point that being audited by E&Y shouldn't mean anything to investors because of a few anecdotal failures of their audits to identify problems isn't valid. We never said that having a big four auditor precludes fraud, of course it doesn't. Only that E&Y is a better name to see than some no-name Chinese auditing firm. The reason those failures are so shocking is because big 4 U.S. firms don't usually get things wrong, and are highly unlikely to be complicit in fraud like some Chinese firms. We've verified all of Xinyuan's building sites on Google Earth, the buildings are there, so a fraud would have to either understate expenses somehow or overstate occupancy rates/pricing, as it is highly unlikely to involve the auditor. We'll take a hard look (the CFO's connection to Longtop was something new) to see if we can find any evidence of fraudulent activity on that level, but the bottom line is that the examples you provide show that it is possible that Xinyuan is a fraud, a fact we admitted. The question here is: how likely is it? Our diagnosis remains that it is very low, though we will carefully explore other ways of confirming/supporting the legitimacy of Xinyuan or exposing it as a fraud if we discover that to be the case somehow. But can top auditors, investment banks, and regulators fail? Sure they can... SinoForest showed us that very clearly, not to mention Enron or WorldCom. Thanks for all of the comments, and we'll keep everyone updated through the comments section of this article (and possibly another article if necessary) if anything should cause our investment thesis to change.
    Mar 28, 2012. 05:18 PM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    Just to make sure this is clear, the 100 mil net income projection is from the company assuming current market conditions (which are far from ideal). It will come in lower if the situation continues to deteriorate, of course, but even net income of half of that figure leaves the company highly undervalued at current prices. Thanks for the comment!
    Mar 28, 2012. 11:00 AM | Likes Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    We respectfully disagree on not weighing E&Y or the IPO process one iota. Having an American auditor is much preferable to a Chinese one with little history, just as having an IPO is preferable to a reverse merger. Neither is perfect, of course, but recall that Arthur Anderson was ruined by Enron, which is exactly why we think E&Y has some weight: top firms have reputations to maintain that are worth everything to them, which gives them stronger incentives to be careful and diligent. As XIN is a relatively small customer, I would be stunned if E&Y was committing crimes on their behalf like Arthur Anderson was for Enron.
    As far as valuations, it is clear that the sector is already shunned by investors given XIN's valuation, the question we focus on is whether or not that shunning is overblown, which we think it is.
    Thanks for your comment and happy investing!
    Mar 28, 2012. 11:00 AM | 1 Like Like |Link to Comment
  • Is Xinyuan Real Estate The World's Cheapest Stock? [View article]
    It seems just as odd to us as well. One major US holder (Blue Ridge Capital, a hedge fund), but other than that very little interest from major U.S. firms. There are a few possible reasons for this:

    1. Low float. Between the company's founder and Blue Ridge roughly 60% of the float is locked in, meaning there is only about 80 million dollars of market cap left for a major investor to buy, meaning for many large funds it would simply be too small of a position for them to invest lots of time vetting it.

    2. Low volume. A result of that is that the stock isn't very liquid, at about $500,000 per day of volume it would take a substantial position weeks to liquidate.

    All in all, I think those two factors are probably keeping major funds out. Its important to note that no one has shorted XIN (short interest is down 50% since the summer) and there are no research reports online penning it as a fraud, which gives us more confidence than if there were substantiated fraud claims available. There's no doubt some fraud risk here, but we believe the market is overestimating that risk, partially because of the factors I mentioned above that lower the attractiveness for large investors who do detailed due diligence. We'll keep a careful eye on it, thanks for the comment!
    Mar 28, 2012. 09:49 AM | 1 Like Like |Link to Comment
  • Seracare Undervalued, Under The Radar, And Eager To Be Acquired [View article]
    Feb 25, 2012. 03:34 AM | Likes Like |Link to Comment
  • Low-Risk Opportunity In Piedmont's Tender Offer For Crescent Financial [View article]

    If you don't think it will be fully subscribed, why did you sell? Thanks for the idea-- this has been interesting to watch.

    Dec 22, 2011. 02:58 AM | Likes Like |Link to Comment