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Pitbull Trading
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Strongly believe in Nassim Taleb's theories. Have a strong focus on the market psychology and behavioral finance aspect of equity trading. Prefer longer term trades for best risk/reward profiles. Still believe Buy & Hold strategies can be relevant in the current market.
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  • 10 Chinese Companies with a P/E less than 10 0 comments
    Mar 2, 2011 12:22 PM | about stocks: ZSTN, CSR, CYOU, CHNG, AOBI, ABAT, CCM, FSIN, YGE, HNP, SOL

    While I have been patiently waiting for the market to correct from irrational levels, I have been running methodical screens and diligently creating a 'buy list' in preparation for lower equity prices. Today I am going to share with everyone 10 Chinese companies that have shares listed here in the USA, and that I feel warrant further investigation upon continued equity weakness.

    Chinese equity issues offer an attractive investment opportunity for American investors because the well known divergence of foreign equities compared to domestic markets. While these shares are traded on domestic exchanges, they are ownership stakes of companies whose primary business is in China. As most investors know, the US equity markets have greatly outperformed Chinese equities in the past year, mostly due to artificial stimulation and support of stock prices by our Federal Reserve. Now may be a great time to rotate out of high-flying US stocks and rotate into some unloved Chinese value companies with strong fundamentals before QE2 ends. 

    I have chosen these Chinese stocks for my buy list for multiple reasons:

    1. They are currently out of favor with hedge funds, mutual funds, average investors, and the mainstream media outlets.
         2.  They are being severly discounted over worry about accounting practices,             and lack of expertise in shareholder relations that is common with American           companies
         3. They trade at very reasonable P/E multiples, in this case < 10

         4. China will remain an important engine of growth in the global economy, and            while it will be undoubtedly a bumpy ride, long-term the growth prospects are          hard to beat.

    In this screener I chose to include stocks whose P/E are less than 10, which have been trading on major exchanges for at least a year, and that have easily understandable business models.

    Name                              Symbol  
    ZST Digital Networks...     ZSTN    
    China Security & ...          CSR        
    Changyou.com Limited    CYOU
    China Natural Gas, Inc.    CHNG
    Advanced Battery Tech.. ABAT
    Concord Medical...           CCM        
    Fushi Copperweld, Inc.     FSIN      
    Yingli Green Energy...      YGE        
    Huaneng Power Intl...       HNP        
    ReneSola Ltd. (ADR)       SOL      

    I would recommend either selecting your favorites out of this list, or diversifying by placing bids for initial positions in these securities 5-10% below current prices. Then when a moment of panic hits the markets, you will be granted an ownership stake in solid companies at a great entry point. While there are plenty of problems with investing in Chinese companies, the risk-reward ratio is beginning to look very appealing for grabbing a stake in Chinese companies that have the benefit of great future organic growth. I think allocating 10-25% of your assets in these Chinese companies provides great diversification and potentially very profitable trades in a well-balanced portfolio. 


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