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Xin He
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I look for value stocks and growth stocks that pay off well in long term. I am also a contrarian investor that look for low risk high return opportunities. I also do angel investing and entertainment related investing as I travel around China.
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  • About PETM
    10 things your pets won't tell youOwning a pet is a lot more than a walk in the park

    www.marketwatch.com/story/10-things-pets...

    1. You'll spend a small fortune on me

    May marks National Pet Month, and it's easy to see why consumers dedicate an entire month to their furry companions. We feed them like family, dress them like family, and even take them to play dates like family. Today 68% of American households own at least one pet, reports the American Pet Products Association (APPA), the industry's lead trade group, up from 56% in 1988.

    As pet ownership grows, so does spending. Consumers will spend $58.5 billion on them this year, projects APPA. That's more than we spend at shoe stores ($32 billion); on video games ($41 billion); and even on private school tuition ($54 billion), reports industry-research firm IBISWorld. "A wider array of people are allowing their pets to play such an important role in their lives," says Bob Vetere, president and chief executive of APPA.

    All of this pampering may help explain why the pet industry is one of the few believed to be resistant to economic downturn. The sector didn't stumble during the recession, and it has maintained steady growth since 1994, the earliest data available, reports APPA. From 2007 to 2009, during the recession, pet-industry revenue jumped 10%. In 2014 alone, it's projected to grow another 5%.

    And for those 44% of pet households with more than one pet, the costs balloon even more. This can lead to a problem if pet owners spend more than they can afford on expenses like veterinary emergencies or pricey diets.

    2. Humans can't sniff out the differences in organic pet food

    Consumers are more conscious of what they eat and some take similar care with their pets' diets. Today, there are dozens of pet-food varieties labeled as "organic," generating $2.9 billion a year in sales, or 12.4% all U.S. pet-food revenue forecast for? this year, reports IBISWorld. While organic pet-food options have existed for at least a decade, some experts saw a surge in interest in alternative pet diets following a tainted pet-food scare in March 2007 when more than 100 brands of pet food were voluntarily recalled. Pet food imported from China that contained melamine - which is used to make plastics and cleaning products - was sickening and killing cats and dogs.

    Click to Play

    Weekend Sip: A new mixer for your 'Moscow Mule'

    Stoli vodka is going in the mixer business -- and they're unveiling a ginger beer, designed for making "it" cocktail, the Moscow Mule. Catey Hill has this week's Weekend Sip.

    "Organic" labels are approved by the U.S. Department of Agriculture (USDA) - although that only refers to how the ingredients are processed - and separate pet food standards don't actually exist. "These [designations] are primarily geared for food for human consumption," says USDA spokesman Sam Jones-Ellard. "The organic standards do not address nutritional values or food safety; we are currently in the process of developing specific organic pet food standards."

    Despite an often higher price tag, there's no scientific proof that organic pet food is actually better than high-quality commercial pet food, according to Louise Murray, a veterinarian and vice president of the American Society for the Prevention of Cruelty to Animals (ASPCA) Animal Hospital. "We can't say for sure whether that's going to make your pet live longer," Murray says, adding that quality control in household pet studies are a challenge, and researchers have to follow the pets over their entire lives for results to be valid.

    3. That treat could kill me

    Since 2007, the FDA has recorded more than 4,800 incidences of "adverse effects," such as vomiting or diarrhea, related to just one treat category: jerky treats. The last seven months alone (since October 2013) account for 37.5% of those reports, roughly 1,800. Over the last 7 years, more than 1,000 deaths have occurred.

    Martine Hartogensis, an FDA veterinarian, says the rate of complaints dropped significantly after several well-known brands, including Milo's Kitchen Chicken Jerky Treats and Canyon Creek Ranch dog treats, were removed from the market (some voluntarily) in January 2013. But an influx of belated complaints came following the October 2013 report, as more consumers became aware of the situation, Hartogensis says. Since then, more than 70 varieties of jerky treats have been recalled due to various contaminant exposures, according to FDA records.

    Despite the recalls (which some manufacturers, like Milo's Kitchen, say are unrelated to the FDA's investigation) and testing for contaminants, the FDA hasn't identified a cause for the reported illnesses and deaths. However, it has noticed a trend. "Chicken, sweet potato, and duck - those three ingredients have been the commonalty in the reports that we've seen," and most of the reports have come from products manufactured in China, Hartogensis says.

    While there's been an association between pet illness and jerky treats, the FDA hasn't confirmed it as the definitive culprit. "It doesn't mean that all of these [reports] are related to jerky treats or that all treats are harmful," Hartogensis adds. Nonetheless, experts advise consumers to supervise their pets when eating a new treat, and to seek veterinarian aid when needed.

    4. My favorite toy is also dangerous

    There are safe toys and unsafe toys for pets, and animals can become sickened or die if they come into contact with the wrong plaything. "There's no regulation regarding toys for pets," says Stephen Zawistowski, a science advisor with the ASPCA. "Consumers should look at these toys and products the same way they would look at toys for their children; make sure that it's a sturdy toy and something that's not going to come apart easily."

    Owners should consider the size of the toy in relation to the pet's size, activity level, and environment. For example, balls and small toys may be choked on, plastic mice have glued-on eyes or tails that can easily detach and be swallowed, and even rope toys can fray and tangle in a dog's intestinal track. To avoid problems, experts suggest altering toys to make them "pet-proof" by removing ribbons, strings, eyes and other small parts entirely. Then, discard the toy when it starts to break down. And always supervise an animal during play time.

    5. I don't really need that many vaccines

    Just like people, pets need vaccinations to prevent disease. But they're not cheap, and no one wants to pay for vaccines their pets don't need. APPA's pet ownership survey (which the owners self-report) says that in 2012, $231 was spent per dog for routine vaccination and wellness visits, while $193 was spent per cat. Depending on the pet's exposure risk, vaccination requirements can vary. According to the American Animal Hospital Association (AAHA) and the American Association of Feline Practitioners - which create the vaccination guidelines - there are several optional vaccines for cats and dogs. For example, the bordetella vaccine is generally recommended if you plan to board your pet or have them professionally groomed; and the feline-leukemia vaccination is beneficial for outdoor cats and all kittens, while indoor adult cats may not need it.

    Click to Play

    Guidelines also suggest that some animals, such as small-breed dogs or those that are sick, shouldn't receive multiple vaccines at once because they're more likely to experience an adverse reaction. Thus, some vets choose to administer optional vaccines at a later date, when the risks are minimal.

    Murray, of the ASPCA Animal Hospital, says that owners may not need to be as vigilant with vaccines for older pets as they should be with puppies and kittens because older pets have developed a stronger immune system, although she didn't provide a specific timetable. "We usually don't vaccinate among the older pets, unless you're talking about vaccines that are required by law, like rabies." However, there's no scientific evidence to suggest that an animal can be over-vaccinated over their lifetime, experts say. But they agree pet owners should talk with their vets to determine the best course of preventative treatment.

    6. It can cost a lot to insure my health

    Consumers will spend $22.8 billion on pet health care in 2014, according to IBISWorld. As pet ownership and pet expenses are on the rise, so is the demand for pet insurance. Currently, only 1% to 3% of pets in the U.S. are covered by insurance, but the pet-insurance industry is projected to grow at an annual average rate of 5.5%, from $650.6 million in revenue in 2012 to $850.5 million by 2017, reports IBISWorld.

    Insurance premiums for pets can range from $15 to $40 per month, depending on the animal's species, breed, age, gender, and location. Higher coverage limits cost more, and owners with comprehensive plans typically spend more in premiums than they would for out-of-pocket expenses, according to AAHA. There can also be exclusions, including preexisting and hereditary conditions, and chronic conditions, like cancer, may require special coverage. Thus, many pet owners see it as a luxury they can't afford, says Kristen Lynch, the executive director of the North American Pet Health Insurance Association.

    But vets and other experts say insurance options are worth considering for some owners, as those with insurance are more likely to seek preventative treatment, which is better for the pet's well-being. "Talk to your vet before you get coverage," Lynch says. "It's good to know in advance that particular breeds have risks, and what those risks could cost." For example, large breed dogs are more susceptible to knee problems, while small dogs and cats may have dental issues, she adds. Some big-name insurance providers even exclude certain hereditary conditions, like alopecia X (hair loss) in Siberian huskies or heart disease in Maine coons. So read the fine print.

    7. Blame my breeder if I'm sick

    Pet-store puppies (and kittens) that come from puppy mills (and kitten mills) are more likely to have health problems, according to experts. These vet bills can last a lifetime since ailments related to interbreeding and poor care during infancy can manifest later in life.

    While kitten mills are a problem in their own right, problems with puppy mills are generally more extensive and more expensive. Animal-welfare groups describe puppy mills in general as large-scale dog breeding operations that place revenue over the well-being of dogs. Thus, the animals are often neglected, and the breeding parents may spend their entire lives kenneled and breed perpetually, as the mills act without regard to responsible breeding practices. Also, puppy mills breed without consideration of genetic quality, while reputable breeders place an emphasis on breeding the healthiest puppies possible, according to the ASPCA. Mills are also less choosy about who buys the puppies they breed: the mills often partner with pet stores to move their inventory, or sell the animals online or in flea markets.

    With an estimated 10,000 puppy mills in the U.S., many of them legal, according to the ASPCA, it can be a challenge to identify a reputable breeder. "Part of the problem is that there is no legal definition of a puppy mill, so if you walk into a pet store and ask if they get their puppies from a puppy mill they can say 'no'," says Cori Menkin, the senior director of the ASPCA Puppy Mills Campaign

    So how can consumers tell if their pet came from a puppy mill? Generally, unscrupulous breeders sell to consumers without meeting them, or they prefer to meet consumers in a parking lot where they can't meet the dog's parents, or there's no evidence that animals live in the breeder's home when consumers are invited in. Some animal-welfare advocates say that responsible breeders will never sell a puppy through any pet store because they want to ensure the puppy is going to the right home. "USDA-certified" and "AKC-registered" labels aren't guarantees, experts say. The ASPCA cites examples of USDA-approved facilities that were in deplorable conditions and the Humane Society of the United States points out that a handful of American Kennel Club (AKC) breeders have been convicted on multiple counts of animal cruelty, with convictions as recent as 2012.

    Proponents of purebred breeding point out a few poor breeders aren't indicative of the industry as a whole. AKC spokeswoman Hillary Prim says it conducts its own kennel inspections. "Responsible breeders have the best chance of producing happy, healthy dogs…those few widely reported cases are not representative of the thousands of breeders whom the AKC inspects annually," she said in an email. Nearly 500,000 purebred dogs were registered with the AKC in 2013.

    For consumers who do spend a small fortune on vet care, there may be some recourse. AVMA reports that 21 states have puppy "lemon laws" requiring sellers to reimburse vet expenses up to the purchase price of the puppy if it becomes sick within a certain time frame. Some purchase agreements even outline a return policy, although animal-welfare groups don't recommend returning a sick pet, especially if a puppy-mill operation is suspected.

    8. My vet is running low on medications

    Currently, there are four "medically necessary" vet products that are in short supply or were discontinued completely, according to the FDA. The medications include those for treating lameness in horses and insecticide poisoning among cats and dogs. But for some veterinarians, the reduced availability of heartworm treatment scares them the most.

    Heartworms are contracted when a mosquito carrying infected larvae feeds on an animal and transmits the larvae through the bite wound. Symptoms include cough, shortness of breath, abnormal function of the organs, and even death.

    But the treatment itself - Immiticide, an organic arsenical compound, and the only FDA-approved treatment to destroy adult heartworms in dogs - is not easy to get.

    Since 2011, there has been a shortage of Immiticide because of issues faced by the U.S. supplier of the drug, Ben Venue Laboratories. The lab's contractor, Merial, also makes heartworm preventative treatments, including Heartgard and Frontline. In October 2013, Ben Venue said it was closing its U.S. facility. "Merial continues to work diligently to return Immiticide to full supply," says Natasha Mahanes, a spokeswoman for Merial, in an email. Merial declined to provide information on revenue and supply levels.

    In the interim, the FDA exercises its enforcement discretion to ship Immiticide manufactured by Merial's European supplier to the U.S., but supply is still low. "This drug is medically necessary and there really isn't enough product to fill the U.S. needs," Hartogensis of the FDA says.

    Stephen Jones, a South Carolina-based veterinarian and the president of the American Heartworm Society says that the restriction is good because it prevents a handful of practices from hoarding large supplies. He adds his practice has never had a problem obtaining Immiticide since Merial began shipping the drug from overseas. But in 2011, there was a 6-to-8-month span when he couldn't get the product at all, as well as when Ben Venue shut down last winter. "We treat 120 to 150 cases a year, but back then there was no Immiticide to be had; that's scary," he says.

    9. Good luck getting an apartment

    Apartment hunting can be stressful for consumers, and options are limited if they have a pet - especially city dwellers with large dogs. The New York City Housing Authority says dogs can't weigh more than 25 pounds, and it prohibits Doberman Pinschers, pit bulls and Rottweilers. Other apartments bar pets entirely. For some people, their only option for a roof over their heads may be to abandon their pets. "Families shouldn't be forced between finding a residence or relinquishing their beloved friends," says Wayne Pacelle, the CEO of the Humane Society, in an email.

    Pet owners may have a little wiggle room when it comes to keeping their four-legged companions, says Hayley Greenberg, a partner at New York-based law firm Greenberg & Merola, LLP, who specializes in animal rights and landlord-tenant cases.

    First, consumers can negotiate a new leasing agreement if a pet is over the weight limit, Greenberg suggests. Second, consumers can probably claim exemption under the NYC pet law, which gives tenants the right to keep their pet if no legal action has been filed during the first 90 days of occupancy. Third, consumers with emotional or physical disabilities who require a pet are protected under anti-discrimination laws.

    Disclosure: I am long PETM.

    Tags: PETM
    May 26 3:53 PM | Link | Comment!
  • LNDC Is Cheap!!! Weather Problem? Don't Worry!

    LNDC becomes a very good bargain as its earnings dragged down by bad weather this year.

    Disclosure: I am long LNDC.

    Tags: LNDC
    Nov 25 7:59 AM | Link | Comment!
  • What Hurricane Sandy Brought After It Hits

    Super storm Sandy had a direct hit into the hearts of some retail stores. Among the victims, there are some undervalued stocks lying on the beach Sandy left behind. The first one I am going to recommend is the Children's Place (NASDAQ:PLCE). Investors have abandoned the Children's Place (PLCE) recently. Shares price dropped more than 15.5% on Thursday last week on cut earnings for 2012. Management now sees full-year 2012 EPS of $3.10-$3.15, down from previous $3.20-$3.30.

    According to CEO Jane Elfers, Hurricane Sandy had a devastating impact on the business and the company will roll out more promotional activities to clear out the redundant inventories. Hence, the discounts will have an impact on the 2012 earnings. Now with the new adjusted earnings, PLCE has a 12 times forward P/E ratio and no long-term debt.

    There are some facts made me a contrarian investor in this stock.

    1. Balance sheet is strong. Although the storm destroyed one of the stores, gross margin will bounce back soon due to the fact comparable sales had grown 1.1% before the storm hit.

    2. E-commerce is growing rapidly for PLCE. 2012 Projected e-commerce revenue is about 10% of the total revenue. The company launched Canada e-commerce site April 2011.

    3. The cut on earnings is not so much a big deal. Look at the numbers, it's about 4-5% down from the previous earnings. Even with a third of its total sales areas affected by Sandy, the company can still manage to maintain decent earnings for 2012.

    4. PLCE operated more than 1,102 stores, as of October. Only one store has been completely damaged. Remember this is a one-time incident so we don't expect another hurricane hit any soon. (Maybe some other big storms will hit, but they certainly don't hit annually like a clock.)

    5. PLCE is expanding into other countries or less natural disaster risk areas. According to the fact sheet, Canada stores and E-commerce contributed 23% sales by channel in 2011.

    6. PLCE is very good at showing in-store experience and inventory control. No need to say, the brand name is one of the best among competitors.

    PLCE is well positioned to take the hit from Sandy. The Children's Place targets middle class in the U.S and Canada and they are going to open and operate more stores in high salary areas where natural disasters are going to happen more frequently than inlands.

    The next one I am going to recommend is Bed Bath & Beyond (NASDAQ:BBBY). BBBY may be a little different from PLCE in this super storm incident. Sandy may have a little positive side to BBBY. E-commerce giant Amazon (NASDAQ:AMZN) has lunched home furnishings website Casa.com. This action forces BBBY to invest more into e-commerce sooner than it expected. Raising cost is a common issue among retail stores these days. E-commerce with stores combined seems to be the best way to fight off the problems. BBBY also had actions to acquire smaller retail stores along with unique products and distributions. These actions are positive moves to reinforce recent business market shares. BBBY's market position is already fairly stable in terms of revenue and profit margin. Its gross margin and operating margin is higher than PLCE. PLCE has a gross margin around 35-38%, and operating margin around 3-5%. BBBY's gross margin is around 40% and operating margin around 16%. Needless to say, BBBY's RoE is an impressive 25% plus. The forward P/E ratio for BBBY is around 10-11 times. The company has no debt and nearly $1 billion cash or cash equivalent.

    Here are some points I want to list out:

    1. BBBY has strong balance sheet and earnings. Looking forward, the company is going to achieve stable low-single-digit growth though e-commerce, store expansion and potential acquisitions.

    2. Scott Black from Delphi Management added shares in BBBY after the 17% plunge after Q2 report in the summer.

    3. Housing market is bouncing back slowly.

    4. Stock repurchase is still ongoing. This is a company that achieved growth since 1993…stock repurchase makes perfect sense if the board thinks they are going to continue to grow.

    5. The company is not afraid of investing into e-commerce. (According to 2011 annual reports, the company is going to invest more into the IT departments for ongoing IT initiatives)

    6. The company has been able to finance its own operations and expansions by generated cash flow. Unlike Best Buy (NYSE:BBY), this company deals with traditional house products, e-commerce will mostly toward low gross margin products. As for Best Buy, e-commerce giant Amazon (AMZN) is stealing high gross margin items like cellphone and tablets from it.

    I like BBBY's position in the market right now and it's not the first time that institutions downgrade it to "neutral" rating. People who worried about BBBY turning into BBY certainly missed some important points I mentioned above.Super storm Sandy had a direct hit into the hearts of some retail stores. Among the victims, there are some undervalued stocks lying on the beach Sandy left behind. The first one I am going to recommend is the Children's Place (PLCE). Investors have abandoned the Children's Place (PLCE) recently. Shares price dropped more than 15.5% on Thursday last week on cut earnings for 2012. Management now sees full-year 2012 EPS of $3.10-$3.15, down from previous $3.20-$3.30.

    According to CEO Jane Elfers, Hurricane Sandy had a devastating impact on the business and the company will roll out more promotional activities to clear out the redundant inventories. Hence, the discounts will have an impact on the 2012 earnings. Now with the new adjusted earnings, PLCE has a 12 times forward P/E ratio and no long-term debt.

    There are some facts made me a contrarian investor in this stock.

    1. Balance sheet is strong. Although the storm destroyed one of the stores, gross margin will bounce back soon due to the fact comparable sales had grown 1.1% before the storm hit.

    2. E-commerce is growing rapidly for PLCE. 2012 Projected e-commerce revenue is about 10% of the total revenue. The company launched Canada e-commerce site April 2011.

    3. The cut on earnings is not so much a big deal. Look at the numbers, it's about 4-5% down from the previous earnings. Even with a third of its total sales areas affected by Sandy, the company can still manage to maintain decent earnings for 2012.

    4. PLCE operated more than 1,102 stores, as of October. Only one store has been completely damaged. Remember this is a one-time incident so we don't expect another hurricane hit any soon. (Maybe some other big storms will hit, but they certainly don't hit annually like a clock.)

    5. PLCE is expanding into other countries or less natural disaster risk areas. According to the fact sheet, Canada stores and E-commerce contributed 23% sales by channel in 2011.

    6. PLCE is very good at showing in-store experience and inventory control. No need to say, the brand name is one of the best among competitors.

    PLCE is well positioned to take the hit from Sandy. The Children's Place targets middle class in the U.S and Canada and they are going to open and operate more stores in high salary areas where natural disasters are going to happen more frequently than inlands.

    The next one I am going to recommend is Bed Bath & Beyond (BBBY). BBBY may be a little different from PLCE in this super storm incident. Sandy may have a little positive side to BBBY. E-commerce giant Amazon (AMZN) has lunched home furnishings website Casa.com. This action forces BBBY to invest more into e-commerce sooner than it expected. Raising cost is a common issue among retail stores these days. E-commerce with stores combined seems to be the best way to fight off the problems. BBBY also had actions to acquire smaller retail stores along with unique products and distributions. These actions are positive moves to reinforce recent business market shares. BBBY's market position is already fairly stable in terms of revenue and profit margin. Its gross margin and operating margin is higher than PLCE. PLCE has a gross margin around 35-38%, and operating margin around 3-5%. BBBY's gross margin is around 40% and operating margin around 16%. Needless to say, BBBY's RoE is an impressive 25% plus. The forward P/E ratio for BBBY is around 10-11 times. The company has no debt and nearly $1 billion cash or cash equivalent.

    Here are some points I want to list out:

    1. BBBY has strong balance sheet and earnings. Looking forward, the company is going to achieve stable low-single-digit growth though e-commerce, store expansion and potential acquisitions.

    2. Scott Black from Delphi Management added shares in BBBY after the 17% plunge after Q2 report in the summer.

    3. Housing market is bouncing back slowly.

    4. Stock repurchase is still ongoing. This is a company that achieved growth since 1993…stock repurchase makes perfect sense if the board thinks they are going to continue to grow.

    5. The company is not afraid of investing into e-commerce. (According to 2011 annual reports, the company is going to invest more into the IT departments for ongoing IT initiatives)

    6. The company has been able to finance its own operations and expansions by generated cash flow. Unlike Best Buy (BBY), this company deals with traditional house products, e-commerce will mostly toward low gross margin products. As for Best Buy, e-commerce giant Amazon (AMZN) is stealing high gross margin items like cellphone and tablets from it.

    I like BBBY's position in the market right now and it's not the first time that institutions downgrade it to "neutral" rating. People who worried about BBBY turning into BBY certainly missed some important points I mentioned above.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BBBY over the next 72 hours.

    Tags: BBBY, PLCE
    Dec 06 6:55 AM | Link | Comment!
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