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Mindful.Investor
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I am an IT professional with MBA from NYU Langone program. I view the investing as part of my practice to control the greed and fear.
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  • Its Time To Buy Diamond Food (DMND) Below 21

    I have been following DMND for three months, and I believe now it is the time to buy.

    Past year was a nightmare for DMND shareholders, the management and the Board definitely did not do their job to maximize shareholders' value. Even today I still cannot understand why, after April 30 2011's report, when company only had $3.5M cash, with $530M debt, but decided to acquire Pringles at $2.4Billion. you would keep wondering how these big guys (DMND management team, Procter Gamble's bosses and lenders) could all sit down and agree such a ridiculous deal.

    Now at $20.70, it is a time to buy.

    1. Even with all the negative news, Diamond' business will not be impacted. Diamond is in consumer goods sector. the recent event will not have any negative impact on sales, as consumers only cares about the quality and price, the will not care about the company booked $80 million to different session.

    2. Seems Diamond has a very successful marketing team. From 2005, Diamond's successful market campaign continues driving revenue higher. In their latest (March 2012) performance update, all of Diamond's brands performed well, gaining market shares from 2~8%. This also shows, selfish and greedy CEOs come and go, but loyal and talented employees are always the backbone of a successful company. I hope the new DMND management team will realize that and reward their much-deserved employees.

    3. We all agree Diamond is short of cash, although it will be tight, but seems their operating cash flow can pay back their scheduled interest for next several years. In 2011's annual report, Diamond revealed their annual interest payment will be $40 million each year ( roughly $20 million interest and $20 million principle), in March 2012, Diamond renegotiated with lender and agreed to pay 0.75% more on interest, which translates to $4.5 million more annually. Diamond also agreed to stop paying dividend, which is $4 million, so their cash out flow for combined debit and dividend will be the same for next several years, be around $45million. Their 2011's cash from operation was $67million. Diamond will be able to survive.

    4. Diamond has a very straight forward business model, I do not believe there will be more account issues besides the company delayed $80million expense. And at current $20, DMND is an extremely attractive target for big companies once their account issue is cleared

    Overall, after DMND restate the report, it has the potential to jump to $30.

    Disclosure: I am long DMND.

    Tags: DMND
    Apr 24 1:25 PM | Link | Comment!
  • Buy Chinese Stock Now, There Will Be No Hard Landing In China!

    Although US economy is recovering moderately, US stock market is topped in short term. First quarter's new factory order data is pretty weak, combining with recent sky rocking oil price, US economy will not have much positive side in the next few months. Once investors realize US's recovery path not as smooth as they hoped, they will immediately worry about our vulnerability to any EU bad news.

    So what is the next attractive asset class we can invest? Chinese stock market. I've been holding neutral to bearish view on Chinese market for last two years, but now it's the time to invest, for following reasons:

    1.China will not suffer hard landing in next two years, economist always worry China will have a hard landing soon, if we call a country's GPD growth dropping from 10% to 8% a hard landing, how can we invest happily in US with GDP at 2% and in EU at -0.3%? Also keep in mind Chinese government chose to tighten the monetary policy to lower the GDP growth, while in US Fed is doing whatever it can to increase US's GDP just over 2%.

    2. Chinese stock market did under perform US in the last two years, but it's not because of any systemic problems like those in US or EU, instead, it's mostly because Chinese Central bank's extremely tight monetary policy (benchmark rate at 6% and bank reserve at 20%). It's understandable Chinese Central bank had to tighten the monetary policy to fight against inflation, as they decided to float Yuan to stimulate export for the last two years. And no stock market will perform well with interest rate higher than 6 percent.

    3. Most importantly, Chinese domestic consumer market finally is catching up, now Chinese government can increase the Yuan band to fight against inflation, so it can now ease the monetary policy to stimulate the growth, further encourage Chinese business and consumer to spend, once Chinese Central bank starts to cut interest rate (soon in my view), Chinese stock market will jump.

    Disclosure: I am long ADY, CAF, SVN, SOHU, FSLR.

    Tags: ADY, CAF, SVN, SOHU, FSLR, China
    Apr 17 11:52 PM | Link | Comment!
  • ADY Has The Potential To Double In 3 Months

    ADY is currently being traded around $2.40, and I believe it will be around $6~$8 in 3 months.

    ADY is one of the top infant milk powder brands in China. It used to be a hot stock back in 2008, when melamine was detected in a wide range of Chinese milk power products, but since ADY's product was among the few that did not contain melamine, the company's revenue surged after the government announced the report. Sequoia Capital invested $63M into ADY to help ADY build farms that met international standards, as the infand milk power industry realized a high quality source of milk is one of the key drivers in attracting the worrisome mothers in China.

    Since the capital injection, ADY has not grown at the speed projected both by the company and Sequoia, so in February 2011, Sequoia decided to quit the funding partnership with ADY. Since then, ADY has faced cash shortage and eventually, it was forced to sell its two farms at $114M collectively. Howver, ADY is still guaranteed to get the raw milk from these two sold farms before any other infant milk power companies.

    I believe ADY is bottomed at this level around $2.40 for following reasons:

    1. The company will have enough cash from the sale of its two farms. (paying Sequoia $65M out of $114M), so bankruptcy will be almost impossible, its investors will realize that in March's annual report.

    2. The company's November sick cows news will drive 4th quarter revenue down slightly, and I believe revenue will be around $69M, with EPS ranges from 17 cents to 21 cents. After ADY denied those rumors, its sales started to recover in December. I expect ADY will earn $0.9 ~ $1 in 2012.

    3. ADY just introduced a tracking system through its new web site. Customers can track the source of milk powder (locations of the manufacturing facilities/farms, specific dates in the whole process. etc.), and this system will not only give customers peace of mind regarding the quality of the product, but also help eliminate the knock off products in the market.

    4. 2012 is the Year of the Dragon, and according to Chinese culture, children born in this year will supposedly be exceptionally lucky. Thus, an amazingly high number of babies will be born, which will drive the whole infant milk powder market.

    5. Just after Chinese New Year, the company annouced 200 new job positions, including sales representatives in multiple regions. It seems the company does not have any concern about the cash flow and is highly confident about the market growth in 2012. I expect the quarterly operation cash flow to be around $25M starting this quarter.

    Below is ADY's past seven quarters' net income and my estimated 4th quarter income.

    Disclosure: I am long ADY, EDU, FMCN.

    Feb 01 10:12 PM | Link | Comment!
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