Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Management has been explicit that they are against privatization. This was one of the first red flags I noted with XIN's valuations, and made me lean towards a negative opinion on their veracity. Their negativity towards privatization at these prices demonstrates a lack of commitment to shareholder value, quite possibly in an attempt to cover up fraud. Caveat emptor.
I see what all the bulls see, the amazing value proposition, but I see an enormous amount of cracks in this ship, and if any one of these cracks becomes a leak, it will sink the entire ship. Once integrity is compromised, end of story.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
In defense of the contrarian-oriented investor, CMG was a strong sell for most institutions when it was selling below $90 a couple years ago. I could not fathom why it was such, a company with no debt, clean earnings, and solid growth during the trough of the Great Recession. Was a great purchase, made over 50% in less than 8 months.
I don't think XIN is anywhere in the league of CMG in terms of quality of company, mainly because my exposure to XIN is zero, whereas I've frequented Chipotle restaurants for several years before considering the stock in my portfolio.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
"in the US, a picture of a politician celebrating success is fair game to post on the web."
Please state an example of this. One that comes to mind is Bob Dole and Viagra, done AFTER he had lost his presidential bid and retired from politics.
To use a politician's persona for commercial purposes is a clear conflict of interest. It is done at the exclusion of the competition. The political message it would send is that Big Government is creeping into the sphere of business in a Big Way and is openly choosing winners. I would find such an activity un-American.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
King707,
If I understand your position correctly, you are leaning long this stock based on a value-oriented methodology centered on the works of Ben Graham and Phil Fisher. You are doing both of these names a great disservice:
1) Ben Graham would not look at a stock like this with such a brief operating history and with almost no documented earnings to speak of (less than 10 years), and a pitiful dividend stream.
2) There is apparently only one person on Wall Street doing scuttlebutt on these firms -- it is not John Paulson, but a former-nobody named Carson Block. If you've taken the time to read his reports, you will have to agree that it is near-picture perfect scuttlebutt. After reading his reports, I came to the conclusion that I should stay away from this entire sector unless I was able to match that level of DD, and it motivated me to write a piece on SA: http://seekingalpha.co...
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I referenced Ben Graham in regards to two concepts - 1) the significance of dividends, and 2) margin of safety in an environment of rampant outright fraud. Please do not use what would otherwise be a creative imagination to misconstrue my words.
You are correct that he put less emphasis on due diligence in his works, but only because he insisted upon a long, steady history of dividend payments that would substantiate a company's cash flow and cash hoard. His DD was cold, hard cash. I have not mis-referenced Ben Graham at all; it seems we have chosen to highlight different aspects of his ideology.
Since we are on the topic of Ben Graham, anyone who has read Ben Graham and understood it would realize that this stock meets many of his balance sheet objectives, but fails miserably where it counts the most, i.e. dividends, operating history, and overall reassurance of the veracity of the operations.
I am also familiar with Fisher's work, and if you took the time to read some of my material, you would discover that I am quite familiar with the scuttlebutt methodology as well. I would imagine that anyone who has done some scuttlebutt on this stock (I have not, except in a detached manner), would question the ability of this firm to compete in New York. Unfortunately, I highly doubt that most people here use that methodology, because most people that have a bullish case for this stock on SA rely on management for their information, exactly what Fisher recommended AGAINST.
I understand that I'm not nearly as famous as either of those two, but at least show some courtesy if you are just entering the debate.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I agree with everything in your comment, but I do not share your optimism. The space in which XIN operates (the US listed only China stock sector) is surrounded by unique circumstances that seems to invite fraud: 1) stifling regulation at home, 2) lack of accountability to any governmental authorities, and 3) complete apathy bordering upon being an accomplice to fraud on the part of Wall Street.
I am a China bull, and my investment thesis involves taking as fact that China will surpass US GDP by 2025 (meaning that at that time, a Chinese citizen will by 1/4 as wealthy as a US citizen). However, these non-SOE US-listed China firms in my opinion are a clear cut case of where the macro picture does not translate to an investment in a particular stock. Are you familiar with Muddy Waters and Carson Block? Have you looked at his reports? Block has made clear that his efforts are confined only to the US-listed-only China space, and that he believes he is only "scratching the surface".
Regarding the US property purchase, this transaction is completely outside its core competency. I haven't done any research into it, but I would imagine they would need to hire a new team in order to familiarize themselves with US property regulations, among other concerns. Also, the CEO does not speak English...!
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
The question I am raising is not whether stated earnings surpass IPO proceeds, but whether or not their dividend can substantiate the legitimacy of its cash flow. Given its tiny amount and extremely limited duration, it cannot.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Thank you for your candor. My investment logic in regards to competitors is that if I cannot do due diligence on my end, surely their competitors will. I found this gem from a Muddy Waters report on CCME (another NYSE traded company):
“Like RINO, CCME’s “Competitors” Do Not Know the Company. We consider it to be a bad sign when a company’s reported financials would make it among the largest in its industry, yet the competition does not know much – or anything – about it. This was one of the most telling aspects of our work on RINO, and it is present again with CCME.”
CCME had buses on the ground -- people who swore they did eyes-on due diligence did not spot this fraud. If Carson Block is wrong, you would expect the market to reflect his misjudgment. Instead, it is trading for $0.02.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
In response to your link, I've read several like it. Essentially, it's a bureaucratic nightmare, state controlled, etc. Regardless, the bottom line is that Chinese people cannot invest in Chinese companies. If these companies go south, no Chinese investors get hurt. If these companies are complete frauds, no Chinese people get hurt - it's doubtful at this time if even the perpetrators of these frauds will face any sort of legal scrutiny, home or abroad. There is no accountability, not in China, not on Wall Street. I don't know about you, but if these companies can't cut it at home, I don't see why they should be able to cut it abroad.
About repeating myself, I have maybe added 10% new content over whatever I've posted in several other articles about this topic - mainly because people continue to bring what I consider to be an uninformed and un-researched bullish case to the table.. I keep asking the same questions because no one has the answers. No one is able to bring convincing evidence to settle claims, in no small part because I cannot read Chinese. If you are unable to read Chinese and are comfortable with that situation, good luck to you. I remain completely and utterly perplexed why anyone would consider the tiny dividend to carry any weight for an investment proposition.
Now that I have directly answered your argument, I will ask that you do the same to the myriad other points I have presented above. Have you even visited their corporate website yet? How about Gurnee's former employer at Globitech?
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Then why can't Chinese investors in China invest in this great company? Why is management adamant about not even considering a dual listing? And what if the Chinese people buying units in these construction projects are buying it from a different company than XIN?
The due diligence conducted by someone buying a can of coke at the local supermarket is wholly different than the due diligence of someone buying KO.
Let me ask you a question, assuming you know how to read Chinese. Who is XIN's competition, and what do they think about XIN?
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I'm not judging them guilty or innocent. I AM saying I consider this stock to be inadequate for my portfolio. It is every investor's right (and in my opinion obligation) to conduct due diligence on all their investments, and to assume that without DD their investment is inadequate for their portfolio. You may disagree with my opinions, which is fine, everyone is entitled to their own opinions. However, you've yet to disagree with me on the facts I've presented.
If you're a short term investor that is worried about the performance of a stock over a two day period, so be it. There are also plenty of people who have held this stock at IPO and probably wish they did more DD before they bought the stock. Personally I've never acquired a position in XIN, and don't see myself doing so in the near future.
I would strongly advise you to read Ben Graham. He invested before, during and after the Great Depression, and you will find his commentary to be much more negative and pessimistic than mine. One thing I've learned from him is to begin with the premise that any idea is inadequate for your portfolio, until you have not only done your homework, but your homework has proven an idea to have enough of a margin of safety to belong in your portfolio. XIN has largely failed this test for me, in no small part because I am not able to adequately analyze this stock.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Well, your comment did make me laugh.
"did Sino spend millions buying back shares? "
Did XIN? And if so, from whom?
"Did they [sino forest] give quarterly dividends back to shareholders?"
Did they need to? Did their stock drop nearly 90% from their IPO, where people questioned the legitimacy of their business? And would a dividend yielding 1% of its IPO price really convince anyone of Sino Forest's legitimacy?
Re-read your Ben Graham (if you have read it at all) - dividends are a testament to the legitimacy of a stock's cash flow if they are sustained and resultant from a strong earnings stream. P&G, hell even MSFT, has given to shareholders many times their book value cold, hard cash. The payout as a percentage from earnings from XIN is 1/5 of what it is for MSFT, and MSFT is not known to be a generous dividend payer. Once XIN actually establishes a track record, then dividends can BEGIN to be seen as a legitimizing factor.
"that whole 200 million from the IPO would've been spent just by analyzing how much dividends, share buybacks, and American investments the company has expensed out."
Do the math, and you will come to realize the error in this statement. The amount that XIN has publicly stated they've spent on these activities falls far short of the IPO proceeds. Also keep in mind that they also actively sought more capital through more offerings until their stock tanked. All of a sudden they magically have $53 million to buy legitimate property in NYC despite their prior hunger for more capital. Of course they do...the question has never been whether or not they have cash. The question is in regards to the legitimacy of its business. Buying legitimate property in New York does nothing to substantiate the legitimacy of its businesses in China.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
They are on the chinese portion of xinyuan's website http://xyre.com. Just do a google search, then google translate, and you can see the pictures for yourself with the company's "official" explanation for posting them on their website.
I for one see absolutely no reason why Hu Jintao would allow his persona to be displayed on a commercial website singing some sort of national anthem in order to enrich foreign investors.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I see what all the bulls see, the amazing value proposition, but I see an enormous amount of cracks in this ship, and if any one of these cracks becomes a leak, it will sink the entire ship. Once integrity is compromised, end of story.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I don't think XIN is anywhere in the league of CMG in terms of quality of company, mainly because my exposure to XIN is zero, whereas I've frequented Chipotle restaurants for several years before considering the stock in my portfolio.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Please state an example of this. One that comes to mind is Bob Dole and Viagra, done AFTER he had lost his presidential bid and retired from politics.
To use a politician's persona for commercial purposes is a clear conflict of interest. It is done at the exclusion of the competition. The political message it would send is that Big Government is creeping into the sphere of business in a Big Way and is openly choosing winners. I would find such an activity un-American.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
If I understand your position correctly, you are leaning long this stock based on a value-oriented methodology centered on the works of Ben Graham and Phil Fisher. You are doing both of these names a great disservice:
1) Ben Graham would not look at a stock like this with such a brief operating history and with almost no documented earnings to speak of (less than 10 years), and a pitiful dividend stream.
2) There is apparently only one person on Wall Street doing scuttlebutt on these firms -- it is not John Paulson, but a former-nobody named Carson Block. If you've taken the time to read his reports, you will have to agree that it is near-picture perfect scuttlebutt. After reading his reports, I came to the conclusion that I should stay away from this entire sector unless I was able to match that level of DD, and it motivated me to write a piece on SA: http://seekingalpha.co...
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
You are correct that he put less emphasis on due diligence in his works, but only because he insisted upon a long, steady history of dividend payments that would substantiate a company's cash flow and cash hoard. His DD was cold, hard cash. I have not mis-referenced Ben Graham at all; it seems we have chosen to highlight different aspects of his ideology.
Since we are on the topic of Ben Graham, anyone who has read Ben Graham and understood it would realize that this stock meets many of his balance sheet objectives, but fails miserably where it counts the most, i.e. dividends, operating history, and overall reassurance of the veracity of the operations.
I am also familiar with Fisher's work, and if you took the time to read some of my material, you would discover that I am quite familiar with the scuttlebutt methodology as well. I would imagine that anyone who has done some scuttlebutt on this stock (I have not, except in a detached manner), would question the ability of this firm to compete in New York. Unfortunately, I highly doubt that most people here use that methodology, because most people that have a bullish case for this stock on SA rely on management for their information, exactly what Fisher recommended AGAINST.
I understand that I'm not nearly as famous as either of those two, but at least show some courtesy if you are just entering the debate.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I am a China bull, and my investment thesis involves taking as fact that China will surpass US GDP by 2025 (meaning that at that time, a Chinese citizen will by 1/4 as wealthy as a US citizen). However, these non-SOE US-listed China firms in my opinion are a clear cut case of where the macro picture does not translate to an investment in a particular stock. Are you familiar with Muddy Waters and Carson Block? Have you looked at his reports? Block has made clear that his efforts are confined only to the US-listed-only China space, and that he believes he is only "scratching the surface".
Regarding the US property purchase, this transaction is completely outside its core competency. I haven't done any research into it, but I would imagine they would need to hire a new team in order to familiarize themselves with US property regulations, among other concerns. Also, the CEO does not speak English...!
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
“Like RINO, CCME’s “Competitors” Do Not Know the Company. We consider it to be a bad sign when a company’s reported financials would make it among the largest in its industry, yet the competition does not know much – or anything – about it. This was one of the most telling aspects of our work on RINO, and it is present again with CCME.”
CCME had buses on the ground -- people who swore they did eyes-on due diligence did not spot this fraud. If Carson Block is wrong, you would expect the market to reflect his misjudgment. Instead, it is trading for $0.02.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
About repeating myself, I have maybe added 10% new content over whatever I've posted in several other articles about this topic - mainly because people continue to bring what I consider to be an uninformed and un-researched bullish case to the table.. I keep asking the same questions because no one has the answers. No one is able to bring convincing evidence to settle claims, in no small part because I cannot read Chinese. If you are unable to read Chinese and are comfortable with that situation, good luck to you. I remain completely and utterly perplexed why anyone would consider the tiny dividend to carry any weight for an investment proposition.
Now that I have directly answered your argument, I will ask that you do the same to the myriad other points I have presented above. Have you even visited their corporate website yet? How about Gurnee's former employer at Globitech?
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
The due diligence conducted by someone buying a can of coke at the local supermarket is wholly different than the due diligence of someone buying KO.
Let me ask you a question, assuming you know how to read Chinese. Who is XIN's competition, and what do they think about XIN?
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
If you're a short term investor that is worried about the performance of a stock over a two day period, so be it. There are also plenty of people who have held this stock at IPO and probably wish they did more DD before they bought the stock. Personally I've never acquired a position in XIN, and don't see myself doing so in the near future.
I would strongly advise you to read Ben Graham. He invested before, during and after the Great Depression, and you will find his commentary to be much more negative and pessimistic than mine. One thing I've learned from him is to begin with the premise that any idea is inadequate for your portfolio, until you have not only done your homework, but your homework has proven an idea to have enough of a margin of safety to belong in your portfolio. XIN has largely failed this test for me, in no small part because I am not able to adequately analyze this stock.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Whose shares? If the shares belong to the fraud perpetrators, then the fraud would stand to gain very much from cashing in on their plan.
"Management has been doing EVERYTHING right. "
Management has been STATING everything right. The veracity of their claims is what is in question.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
"did Sino spend millions buying back shares? "
Did XIN? And if so, from whom?
"Did they [sino forest] give quarterly dividends back to shareholders?"
Did they need to? Did their stock drop nearly 90% from their IPO, where people questioned the legitimacy of their business? And would a dividend yielding 1% of its IPO price really convince anyone of Sino Forest's legitimacy?
Re-read your Ben Graham (if you have read it at all) - dividends are a testament to the legitimacy of a stock's cash flow if they are sustained and resultant from a strong earnings stream. P&G, hell even MSFT, has given to shareholders many times their book value cold, hard cash. The payout as a percentage from earnings from XIN is 1/5 of what it is for MSFT, and MSFT is not known to be a generous dividend payer. Once XIN actually establishes a track record, then dividends can BEGIN to be seen as a legitimizing factor.
"that whole 200 million from the IPO would've been spent just by analyzing how much dividends, share buybacks, and American investments the company has expensed out."
Do the math, and you will come to realize the error in this statement. The amount that XIN has publicly stated they've spent on these activities falls far short of the IPO proceeds. Also keep in mind that they also actively sought more capital through more offerings until their stock tanked. All of a sudden they magically have $53 million to buy legitimate property in NYC despite their prior hunger for more capital. Of course they do...the question has never been whether or not they have cash. The question is in regards to the legitimacy of its business. Buying legitimate property in New York does nothing to substantiate the legitimacy of its businesses in China.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
I for one see absolutely no reason why Hu Jintao would allow his persona to be displayed on a commercial website singing some sort of national anthem in order to enrich foreign investors.
Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
Else, we have Hu Jintao visiting a property owned by foreign investors for blatantly commercial purposes.