Jason Tillberg

American Oriental's Q3 Disappoints Again

You can make the case that when stocks go from being good values from a Graham and Dodd approach like AOB is now, to a Bill O'Neil approach, like AMZN is now, is where the biggest gains are ever made in stocks.

I'm long AOB and like from a valuation perspective very much. I would be happy if AOB didn't even grow earnings at all for the next 5 years. I would however worry if earning declined further. But I don't see that happening because net margins may have bottomed out.

According to Reuters ProVestor Plus Company Report, AOB had net margin for Past 5 Years at 22.7% while the sector average was 13%. For the past 12 months, AOB has net margins at 16% while the sectors was 16.4%. So they simply came back to average.

AOB's margins are now at sector average and may not fall so much from here simply based on averages.

3.80 a share now as I write. Perhaps downside is 3.50. But this is a good value again, as any growth in earnings at all is a bonus.

Wild card is they make far more lucrative acquisitions in the future.

AOB's Cash Generation Provides Backstop to Earnings Miss

Wonderful wrap up of the earnings report. There certainly is a large degree of margin of safety in the current share price. That was my thoughts as well.

I've been taking advantage of selling the 5.00 calls against my position. It got called away in July when it was over 5.00. But I had the opportunity to buy back just last week at 4.09.

I will likely be selling the Jan or April 5.00 calls soon. I'd like to see the price work itself back up to the mid 4's and then sell the calls.

.

Starbucks: Highly Overvalued in a Mightily Overbought Market

I bought a Jan 16.00 put today. 10 contracts for speculation.

Covered Call Strategy with American Oriental BioEngineering

1. There are already over 2000 January 2010 5.00 call contracts outstanding and it looked like 470 contracts traded yesterday. There should be enough.

2. The idea of this is for sound monthly income. 8 months is not a long time and rather than sell monthly calls, which is also very valid and to be honest, for my own account, I have June and July 5.00 calls right now on my position. The reward might be better doing so, but the risk is higher. Say it goes to 3.50 a share . The coming months 5.00 call I may only get 5 cents or 10 cents at most and not be able to sell 1.00 worth of premium by October. Of if it goes over 5.00, I'm out and have to employ funds in another investment or leave in cash at .25% annual yield.



On May 29 12:04 AM juan77 wrote:

> Sounds like a good idea. A couple of observations:
> 1. AOB is a small cap with a light volume. I don't know how easy
> it would be to sell 550 contracts of this stock.
> 2. 8 months is a life time in this macro economic climate and who
> knows where things will be 8 months later.If you can find a brokerage
> that offers cheap commission rates for Options(perhaps just a flat
> rate Vs fee per contract), why not sell covered calls every month
> instead of writing calls for Jan 2010? This will allow you to reassess
> the risk every month and offers the flexibility to maybe move out
> to another stock if needed.

In the Bargain Bin: American Oriental Bioengineering

Hi Jeffery,

Nothing more than from what was said on conferance call as well. The earnings estimates were brought down for that reason however and that was considered in the analysis.

Next earnings report should shed more light on that product for sure.

Jason


On May 01 08:11 PM Jeffrey Walkenhorst wrote:

> Hi Jason,
> Thanks for the article. How much do you know re: the SHL situation
> in China and impact to AOB (beyond what mgmt relayed on last call)?
> Any details you can share re: the dynamics and ongoing risk are appreciated.
>
> Thanks,
> Jeff
>
> From 4Q call:
> "Third, we expect some impact from the recent recall of SHL injectables.
> While AOBO’s products was not recalled, SHL contributed roughly 15%
> of our total revenue in 2008, as sales volume will likely decline
> year-over-year as the recall impact industry-wide demand."

In the Bargain Bin: American Oriental Bioengineering

This is a move that took the stock down from over 7.00 in January to as low as 3.30 earlier this month: app.quotemedia.com/quo...

If you are serious to giving this company thought, read that news article and read what Tony says. Here is sample: 'Our recent property purchase in the BDA is a long-term investment in AOBO which builds out our multi-functional headquarters and centralizes our management in Beijing, while deepening our presence in a very important development region focused on attracting leading pharmaceutical companies. Additionally, at a time when our significant cash position yields negative real returns, this fixed asset allocation does not constrain our financial flexibility, but rather, we believe, positions us to secure government support in various forms, such as R&D grants related to the PRC's stimulus plan as well as potential low-interest bank loans.'

Just 4 days later, the PRC granted AOBO High Tech Status, just as Tony suggested.

app.quotemedia.com/quo...

My opinion was the the purchase of the building was a fine deal given that the cash on hand was earning negative real rates of return and what's wrong with buying a building outright in cash that should help with growth ahead.




On Mar 29 02:44 PM Ånden som Går wrote:

> "CEO's" move? Please explain, I don't know this company very well,
> but I'm considering it.

Recessionary Equity Strategies: Flight to Quality

Thanks for these lists. Solid names.