Josh Stern

11 Reasons Why It's Time to Invest in China and 5 Ways to Play It

I agree with the thesis of the article and I've acted on it (my positions are in different stocks than the ones mentioned). However, my experience suggests that the greatest risk to investing in at least the smaller Chinese companies that one is attracted to because of their very low valuations is that the mgmt. and BOD (often controlled by the same principals) believe they are growth companies and will typically attempt to pursue overall growth rather than Ben Graham type shareholder value. In fairness, they are often just doing what they claimed they would do in their original IPO prospectus, but shareholders are inevitably disappointed when companies with trailing P/E under 4 and a lot of cash choose to use the cash to acquire another company with trailing P/E of 10 or worse, invest the cash in a new facility costing 20-50% of their then current market cap.