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Carl Icahn is again in the news. This time is about the Yahoo (Nasdaq:YHOO) shareholder proxy fight. Basically Carl bought a bunch Yahoo shares after the Microsoft deal fell through, and he is trying to remove the current Yahoo board, and make the sale to Microsoft. Intelligent observers may say did not Microsoft walked away already? What if MSFT do not take the bait? Well, I think Mr. Icahn has plan B when he has this in mind. If the MSFT deal do not work, and it looks like Google is neither interested nor in a position to buy the whole piece of Yahoo (anti trust issue), Carl can cut Yahoo in pieces and sell it to different companies. So for instance, sell Alibaba stake to eBay (I use this just as an example, not that I know eBay is interested in Alibaba), sell Yahoo Finance to Sina,…anyway you got the idea.

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(Update May15) My friend Sun also set up a donation page for earthquake relief. He even put up a challenge (match) for Paypal donors. Kudos to him. I sent a check of $51.20 to OSCCF today.

(Source: NPR.org, more pictures from NPR)

(Original) There are lots of organizations one can donate for the China earthquake, such as this list (Chinese) and another list (English). I think everyone can pick an amount and a charity feel comfortable. Also the wider the participation (more people give in small amount), the better. Note some employers offer match for certain charities, and there is tax deduction for donors if the charity has registered with IRS for that purpose (there is an EIN). Personally I am debating about the following two:

1. Overseas Saving Chinese Children Fundation: as name implied, the emphasis is on the need of small kids.

2. Peking Univ Fundation: Chinese, English, they said the donation will be “for the middle and primary schools in the disaster area in China. All donations will be transferred to benefit schools within a month.”

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Who is EDS?
EDS (NYSE:EDS), Electronic Data System, the IT service company founded by legendary Texan Ross Perot with $1,000, at once time was No. 2 US IT service provider (second to IBM). Today HP (NYSE:HPQ) announced buying EDS for $13.9 billion.

Among many things, EDS was famous for its hiring of former Navy/Marine, their tough work ethic, and its college graduate “system engineer” training program. Its current vice chairman Jeff Heller (former COO) was a graduate of that program. Interestingly, EDS was also my former employer: the company I worked for was a subsidiary of EDS for a few years.

Business wise, EDS has many goverment contracts (started from Medicare), from US federal and state goverment, to UK and other European countries. Industry wise, EDS was once the IT subsidiray of General Motor (bought by GM in 1984), before its spinoff from GM on 1996.

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I quoted some questions which are relevant for little guys (like me). The full transcript can be located at gurufocus. WB: Warren Buffett, CM: Charlie Munger, MX: yours truely.

BTW, I bought one more BRK.B yesterday, at $4130, not the lowest price of the day but about 5% off the price I bought for my first share. A few things happened since April 3 the day I bought it: the CEO of General Re resigned because of AIG scandal; Mars Wrigley deal; annual shareholder meeting (BRK.A and BRK.B both ran before the meeting); the Q1 earning result was not good because of paper loss of stock index derivatives. But I don’t think those things worsened the value of BRK in anyway.

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Q9: Melbourne Auz. Berkshire has bought a lot of shares in last twelve months in listed companies. Do you expect return to be between 7-10% pa over many years? Well below achievements in past.

WB: Yes. We would be very happy if we could buy pretax returns of 10%, dividends included. We would probably settle for a little less than that. Berkshire returns will be less, no question, in future than in past. We operate now in universe of marketable stocks with caps of 10bil, but really 50bil and up in order to have an impact. This universe is not as profitable. If we find 10bil, a 5% position is 500mil. If it doubles, we make 325m, this is less than 2/10ths of 1%. We have found things to do time to time to make money. They are nice, but don’t move needle much at Berkshire. Anyone who expects us to replicate past should sell their stock. We’ll get decent returns, but not indecent returns.

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(Update May 13) I put two links about Sichuan earthquake on the top of middle side bar: one in Chinese; one in English.

Yesterday afternoon when I listened to NPR Melissa Block live report (click on listen: Melissa Block at a shattered school) from Chengdu/China, I was almost in tears. Melissa was in Chengdu for special report on what’s new in China, and was caught by the earquake.

Earthquake
By now you may have heard the 7.8 earthquake happened in China Si’chuan province. The Chinese goverment and its people are doing their best to rescue the people being buried under the rubbles. A few weeks ago we had a 5.2 earthquake happened near St. Louis (the epicenter is about 100 miles away from STL, news in English, in Chinese). But this 7.8 is at the famous Tangshan earthquake level (1976), in which 250,000 lives were lost.

When natural disaster like that happens, we human beings some times felt powerless. We also got opportunity take a deep breath, and ask ourselves, what is the most precious thing in life? I remember people asked this question after Sept. 11 world trader center incidents.

On the positive side, amid the recent China snow storm (before Chinese New Year), I read 13 Tangshan farmers volunteered to help restoring power in Hu’nan. Volunterism is still new in China, but very refreshing.

More later,
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Baidu, Google China
Keso wrote this Chinese article a while back Who is Google China’s opponent? He is talking about the difference between Baidu (Nasdaq:BIDU) and Google, and he thinks Baidu has created a brand and a series of products, and consequently built a moat to fend off Google and other competitors.

This is confirmed by gseeker baidu from readers series: “baidu” real estate, “baidu” fashion apparel, “baidu” KTV. Don’t know how Robin Li (Baidu CEO) feels about people using his company’s name? By the way, gseeker is the best blog about Google in China, in my mind.

From my observation China Internet users (compared to US) are generally younger, and their user habbits are also different (more entertainment, less e-commerce, shoppping). In big picture, Baidu and Google are both Internet ad broker/operator, and Wallstreet like to say Baidu is China’s Google. Baidu is more than that. Its local expertise served it well so far.

(Buy 2 shares of Baidu, says an article of CapitalWeek, full size pic here)

Barrons top 500 companies
It ranks Blackrock, RIM as No. 1 and 2. But the ranking itself (the criteria) does not make much sense to me. Barrons likes to run some non-sense ranking such as this one, and another one couple weeks ago: “Top 100 financial advisors”, which is esentially ranks by the amount of money they manage. That is a measurement of their sales skill, not their portfolio managent skills.

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Last week, an American friends asked me about the booming Chinese eocnomy and how to benifit from it. There are many Chinese ADRs in listed in the US market these days, but I don’t think they are suitable for most individual investors (they are for the bolder speculators only

Why ICBC
ICBC, Industrial and Commercial Bank of China, 中国工商银行 or 工行 (Chinese like abbreviation too). I am using Buffett’s rules of thumb to analyze ICBC. The rules are: business is understandble, business has a moat, sound management and attractive price.

Business: Chinese banks essentiall do similar things as foreign banks. They borrow at lower rate and lend at a higher rate; they act as broker for financial products (intermedietary service). The main difference (compared to western banks) is Chinese banks derives more revenue/profit from lending. The intermedietary business is growing fast though.

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GSI Techonology
As I talked in my previous post (a while ago), this is the little semi-conductor (very fast SRAM) stock (Nasdaq: GSIT) I bought a year ago at its IPO. Since its IPO it reported two disappointing quarters at first, more recently it reported two decent quarters (Fiscal Q4, Fiscal Q3). But I sold it this morning due to the following:

1) Lack of liquidity: the daily volume on this stock is thin because of lack of institutional support. Basically if I want to sell, the day after earning report is a good time because of the volume spike.

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Yesterday, our home PC acted strangely after my wife downloaded something from a China web site, basically there is always an Ad bar at the top of Internet Explorer (something like the picture below, full size pic here).

To fight against the ad bar, I did the following: upgrade the IE to 7. That did not solve the problem. I also looked the new files under “Program Files”, “Windows”, just by looking at the date. I did find a DLL named twkdtsdjdrqdp.dll, but I could not remove it. Did the “regedit”, before the install of IE 7. All these did not work, and we are both upset about that.

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In the annual shareholder meeting of Berkshire Hathaway, Buffett and Munger took on a series of questions from audience as usual. Although I did not go, I found some of those Q&A both interesting and educational. Thanks to gurufocus, the full transcript is here (WB: Warren Buffett, CM: Charlie Munger).

Q5: Would you use stock options to enter a position in a public co?

WB: If you want to buy or sell a stock, you should buy or sell a stock. We sold puts on Coca-cola once, but usually it is best to just buy stock. Using option technique is an idea where you get to buy a stock cheap. 4 out of 5 times you get it right and one time you may miss the opportunity to buy. We virtually have never used options to enter or exit a position. We have sold long term equity put options described in press report. We don’t get involved in fancy techniques.

CM: If I remember right, a public authority was wondering if they should set up an option exchange market. Warren was alone in the opinion (against it). You wrote a letter saying it wouldn’t do any good to throw out margin rules in this fashion. It doesn’t serve the country. I always thought Warren was totally right. Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.

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