Karl Francis

Why I Sold My China Positions

Nouriel Roubini is a perma bear, no China expert. Following him, you should not hold shares at all.
If you base your decisions on the hodgepodge of partly inaccurate, partly irrelevant facts you present, I wonder how you can make sound decisions and outperform the markets. In Q3, China's economy was growing at 9% y/y, nominal retail sales were up 21% y/y, despite US in recession, flat export growth, depressed steel prices, flat local real estate markets. 3/4 of its growth is internal, independent from exports; a lot comes from infrastructure investments, financed through high savings rates. The huge stimulus package will make sure that impressive growth will continue.

For stock selection, you have always to look at the sector and the particular company. Not all sectors will benefit equally. Chinese pharmaceutical stocks in particular are immune to the global crisis, in a long term impressive growth market and some of them are dirt cheap currently, certainly no sells.
Retail sales will also continue growing at high rates. China 3C, that you mentioned, is well placed in its segment of the retail sector with its 1000+ stores, had impressive same store growth in Q3, outperforming its sector, and is trading at a PE ratio of 2, or 1.4, if you deduct net cash. The company will continue to grow organically and through acquisitions, certainly no sell either

China 3C Group Finally Turns a Corner

This stock is grotesquely undervalued.

The downfall of the share price was caused by deficient communications from part of the management, a very conservative outlook for earnings at the beginning of the year and a general lack of interest in Chinese small caps this year. Such phases are recurring and are usually followed by some explosive share price recovery.

With current business trends, earnings of $.50/share in 2008 look very conservative.

Operating wise, management is doing a very good job - low cost operations, very fast turnover of merchandise. No debt, net cash currently around $35M or $.70/share.

Management is looking for acquisitions accretive to earnings. Without acquisitions, net cash will be around $50M or $1/share at year end.

Deducting that cash, expected 2008 PE is close to 2

It’s a $10 stock. The stock is coming down from $8.5. Nobody should be surprised if that level is revisited in the next 12 months.

China 3C Group Hits Major Milestone

If I have interpreted the recent quarterly statement correctly, 2008 EPS should be .45 or better. So, the PE is less than 3.