I just checked out TheStreet.com's analyst report on AgFeed. Absolute crap. They rate it a sell. Well, what do they know? Let's look at their record with this stock. They recommended holding it at its peak of $17.02 until it bottomed, and then changed their recommendation to a sell right before it shot up 700%. Nice work TheStreet.com. I'll give your recommendation the consideration it deserves.
6.27.2009
WTF Does TheStreet.com know anyway?
I just checked out TheStreet.com's analyst report on AgFeed. Absolute crap. They rate it a sell. Well, what do they know? Let's look at their record with this stock. They recommended holding it at its peak of $17.02 until it bottomed, and then changed their recommendation to a sell right before it shot up 700%. Nice work TheStreet.com. I'll give your recommendation the consideration it deserves.
Chinese Pork Prices
I'm going to assume that only I read this article about rising pork prices in China. According to AgFeed's most recent quarterly report, its hog farms were responsible for 70% of its revenue. Pork prices are *very* important to where this stock is headed.
6.26.2009
Portfolio Update 06.26.2009
Didn't alter my holdings at all this week. Dow Jones was down 1.187% from its June 19th close. I'm down 2.281% over the same period. It was a good call to move so much of my portfolio into cash. I should have done it a week earlier, but whatever.
I'm confident in Chinese growth, so even if we've moved into a bear market I'm holding AgFeed. I'll do some research this weekend, but I don't plan on buying or selling anything next week.
6.24.2009
Prognosis: correct. Reasons: wrong
Nepstar has taken off since this past weekend. You could have bought a share of Nepstar on Monday morning for $4.45 and it closed today at $5.37. Up 21% in three days. Not bad.
Of course, I didn't recommend buying it. I took it all back at the last minute. The reason was that the first quarter's earnings and net income were below where I thought the lowest possible point existed. The reason is obvious, but I dismissed it at the time. The majority of Nepstar's drugstores are in Guangdong province. That's one of the wealthiest regions of China because the lion's share of China's exports are made there. So it has been hit especially hard during this recession.
But, that apparently doesn't matter. Up 21% in 3 days. I missed that boat. Too bad.
Of course, I didn't recommend buying it. I took it all back at the last minute. The reason was that the first quarter's earnings and net income were below where I thought the lowest possible point existed. The reason is obvious, but I dismissed it at the time. The majority of Nepstar's drugstores are in Guangdong province. That's one of the wealthiest regions of China because the lion's share of China's exports are made there. So it has been hit especially hard during this recession.
But, that apparently doesn't matter. Up 21% in 3 days. I missed that boat. Too bad.
6.21.2009
China Nepstar
***********READ THIS WARNING!**************
This is a post I wrote this morning, before listening to the first quarter's conference call and reading the quarter's financial report. I now take back what I am about to say. I think it's important to post this for everyone to see, because I was wrong. I was blinded by what I thought was a sure thing, but I want everyone to search for where I went wrong. Feel free to post a comment if you figure it out.
**************************************************
China Nepstar Chain Drugstore, Ltd. (NYSE:NPD) is trading at $4.45 a share and, in my most humble of opinions, that's cheap.
China Nepstar is the CVS of China. They operate 2,907 of China's 315,000 drugstores (as of December 31, 2008) and that makes them the largest direct operator in China. So just like hog producers, pharmacies operate in an extremely fragmented market. The largest chain of drugstores is just 0.8% of the market. Not 8%, but 0.8%.
I'm not actually recommending China Nepstar, because I would feel terrible if I told anyone to buy a stock and it lost money. All I'm saying is that when Monday comes, I'm probably going to buy a bunch of it.
I have a legal pad in front of me and I just made a long list of reasons why I like this stock and a list of questions I have about the future. I'll get to that in a minute, but here's what is most important:
This is a chart of Nepstar's sales in the past 3 years. Sales growth in 2007 was 12.8%, and in 2008 it was 22.6%. Now, China won't grow in 2009 like it did in 2008 or 2007, but it's NOT shrinking. The economies of the US and the rest of the industrialized world are shrinking, China's is not. I don't know what revenues will look like in 2009, but my instinct is that they'll be higher than 2008's. So consider this:
This is a graph of Nepstar's net income for the same years. Net Income as a percentage of revenue was 0.8% in 2006, 7.6% in 2007, and 8.1% in 2008. Net income as a percentage of revenue is increasing. Even if you assume Nepstar will be no more profitable in 2009 than it was in 2008, income will still rise if revenue does. Nepstar's shares are currently trading at $4.45, implying a market cap of $463.45 million. According to Google Finance, the P/E ratio is 19.72. If you divide the market cap by the P/E ratio, you get expected earnings for 2009. The implied earnings are then $23.5 million (159 million CNY) . I included this number in the graph above as 2009's net income. Now, (as Barack Obama likes to say) let me be clear: the stock market currently thinks income in 2009 is going to be that much lower than 2008's. China is projected to grow at 7.2% this year. Nepstar has no debt, $175 million in cash and equivalents, plenty of growth opportunities, and it's revenues and net income are rising. The stock market is projecting a reduction in net income by 17%. If you think Nepstar WON'T shrink by that much, then the stock is currently cheap and you just have to wait for everyone else to figure that out.
I think this will jump 30% in the immediate future (it was trading at $5.81 a month ago), but then go much higher as we get some sense of what revenue and income look like. Obviously we're talking about a Chinese company though, so the risks are redonkeylips. I can't even imagine what could go wrong with this company in the next year.
Again, anyone who buys a stock on someone else's recommendation without even reading the 10-K (or 20-F in this case) is a buffoon.
This is a post I wrote this morning, before listening to the first quarter's conference call and reading the quarter's financial report. I now take back what I am about to say. I think it's important to post this for everyone to see, because I was wrong. I was blinded by what I thought was a sure thing, but I want everyone to search for where I went wrong. Feel free to post a comment if you figure it out.
**************************************************
China Nepstar Chain Drugstore, Ltd. (NYSE:NPD) is trading at $4.45 a share and, in my most humble of opinions, that's cheap.China Nepstar is the CVS of China. They operate 2,907 of China's 315,000 drugstores (as of December 31, 2008) and that makes them the largest direct operator in China. So just like hog producers, pharmacies operate in an extremely fragmented market. The largest chain of drugstores is just 0.8% of the market. Not 8%, but 0.8%.
I'm not actually recommending China Nepstar, because I would feel terrible if I told anyone to buy a stock and it lost money. All I'm saying is that when Monday comes, I'm probably going to buy a bunch of it.
I have a legal pad in front of me and I just made a long list of reasons why I like this stock and a list of questions I have about the future. I'll get to that in a minute, but here's what is most important:
This is a chart of Nepstar's sales in the past 3 years. Sales growth in 2007 was 12.8%, and in 2008 it was 22.6%. Now, China won't grow in 2009 like it did in 2008 or 2007, but it's NOT shrinking. The economies of the US and the rest of the industrialized world are shrinking, China's is not. I don't know what revenues will look like in 2009, but my instinct is that they'll be higher than 2008's. So consider this:
This is a graph of Nepstar's net income for the same years. Net Income as a percentage of revenue was 0.8% in 2006, 7.6% in 2007, and 8.1% in 2008. Net income as a percentage of revenue is increasing. Even if you assume Nepstar will be no more profitable in 2009 than it was in 2008, income will still rise if revenue does. Nepstar's shares are currently trading at $4.45, implying a market cap of $463.45 million. According to Google Finance, the P/E ratio is 19.72. If you divide the market cap by the P/E ratio, you get expected earnings for 2009. The implied earnings are then $23.5 million (159 million CNY) . I included this number in the graph above as 2009's net income. Now, (as Barack Obama likes to say) let me be clear: the stock market currently thinks income in 2009 is going to be that much lower than 2008's. China is projected to grow at 7.2% this year. Nepstar has no debt, $175 million in cash and equivalents, plenty of growth opportunities, and it's revenues and net income are rising. The stock market is projecting a reduction in net income by 17%. If you think Nepstar WON'T shrink by that much, then the stock is currently cheap and you just have to wait for everyone else to figure that out.I think this will jump 30% in the immediate future (it was trading at $5.81 a month ago), but then go much higher as we get some sense of what revenue and income look like. Obviously we're talking about a Chinese company though, so the risks are redonkeylips. I can't even imagine what could go wrong with this company in the next year.
Again, anyone who buys a stock on someone else's recommendation without even reading the 10-K (or 20-F in this case) is a buffoon.
6.20.2009
Developing Asia
I'm only looking at stocks that do a majority of their business in Asia. The IMF just upgraded its growth target for the US this week. It expects the US to contract at a mere 2.5% this year, and show scorching 0.75% growth in 2010. Meanwhile, the World Bank expects China to grow at 7.2% in 2009 and even faster in 2010. It doesn't take a genius to see where the opportunity lies. I'm thigh-deep in AgFeed after another 150 shares this week, and now I'm looking at Chinese ADRs with good balance sheets. My take on China Nepstar (NYSE: NPD) to follow.
6.19.2009
Portfolio Update 06.19.2009
I took a hit along with the rest of the market this week. The Dow Jones fell 2.13% on Monday, 1.25% on Tuesday, 0.09% on Wednesday and 0.19% on Friday. It was up slightly on Thursday, but the week ended 260 points lower than it opened. That might not seem like a lot, but it is. I hemorrhaged money until Thursday. I rebounded a bit, even making money on Friday while the market was down.
I dramatically changed my portfolio on Wednesday. I think it was emotional buying (I lost $235.19, $45.32, and $217.92 in the first three days of the week), but I got rid of everything but my AgFeed and Bank of America. I was down quite a bit on my MGM Mirage, but everything else was either slightly higher or lower than when I bought it. I think I made money overall, but I consider it a wash (even after trading fees). AgFeed fell more than I ever imagined it could, so after freeing up $2400 in cash, I moved another $900 into AgFeed at the depressed price. My average cost is now $4.98 a share and it closed at $6.24 on Friday.
This bull market might be retreating, so I'm keeping $1,500 in cash right now. I'm going to wait and see what the market does.
[[[Holdings: 20 BAC; 315 FEED]]]
6.12.2009
Portfolio Update 06.12.2009
The major American indeces were flat for the week (06.08-06.12) and so was I. The Dow Jones just turned positive for the year which the personalities on CNBC were excited about. Big deal. Mumbai and Shanghai are up more than 50% over the same period, and Hong Kong is up 31% since January 1st.
Over the same period that the Dow Jones managed to break even, I'm up 45.6%. Eat it.
[[[Holdings: 15 X; 25 BWP; 20 BAC; 35 MGM; 28 DPS; 400 EVC; 1150 LBIX; 165 FEED]]]
6.05.2009
Portfolio Update 06.05.2009
I'm up almost 33% since October 1, 2008.
AgFeed was a great idea. I'm up 66% since I bought it May 12th. Pork prices have bottomed in China, so even if these shares hit a rough patch, I think they have farther to go.
I'm going to sell my shares of Dr. Pepper when they approach $24. That was Goldman Sachs' price target when I bought them.
I told Daniela that I was going to move a bunch of money into Entravision (EVC) when we see Chrysler and GM ads on TV again. Advertising from auto companies makes up 20% of EVC's ad dollars. So when both of those firms begin spending on advertising again, I'm going to reshuffle my portfolio.
AgFeed was a great idea. I'm up 66% since I bought it May 12th. Pork prices have bottomed in China, so even if these shares hit a rough patch, I think they have farther to go.
I'm going to sell my shares of Dr. Pepper when they approach $24. That was Goldman Sachs' price target when I bought them.
I told Daniela that I was going to move a bunch of money into Entravision (EVC) when we see Chrysler and GM ads on TV again. Advertising from auto companies makes up 20% of EVC's ad dollars. So when both of those firms begin spending on advertising again, I'm going to reshuffle my portfolio.
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