Highlights
From its IR web site

Video
CEO interview (cantos, free registrastion required, look for Syngenta).

Forbes: Syngenta A Place to Plant Investment .

Also quote Bloomberg news here.

Syngenta AG, the world’s biggest maker of agricultural chemicals, reported a 25 percent increase in first-half profit and raised its earnings targets as record grain prices spurred farmers to buy more pesticides and seeds.

Net income rose to $1.52 billion, or $15.93 a share, from $1.22 billion, or $12.43, a year earlier, Basel, Switzerland- based Syngenta said in a statement today. Analysts in a survey predicted profit of $1.47 billion.

Sales gained 28 percent to $7.3 billion. The importance of the northern hemisphere’s growing season means the company tends to do two-thirds of its business in the first half.

The cult culture
Over the years Apple has this cult like culture among its fans. Looking at site such as MacRumors you will get an idea. While I think Apple products are generally very good, I don’t like their prices. It seems they are going to lower their prices, as they are expanding their market. This is a delicate problem for Apple because people usually got wooed to Apple because of its unique design, cool brand, and thus get the “being cool” status from friends. Now if Apple is everywhere, like iPod did, it loses that status. But Apple is going to pursue this route anyway, under the pressure from Wall Street. This can be shown in its earning forecast for next quarter.

Earning
Apple released its 3Q 08 earning yesterday, and the number was good. But it offered so-so guidance, which drove its stock lower today. We know Apple usually likes to sandbag its earning guidance, i.e., they lowered the expectation, and then try to beat it. But this time the number is much lower than expectation, which makes people (e.g., tech-ticker guys) think they are trying to get market share at the expense of profit.

Stock
These days I am hasitate to buy a stock when the buzz is all around. Apple just released its iPhone 3G on July 11. While I think Apple will do well in China and many emerging market, I think the current valuation is too high for a large cap consumer-fashion-tech stock. Also keep in mind the US economy is in recession, so this back to school season will not be strong. Considering all this, I would not touch AAPL for now.

China’s role in the Fannie/Freddie mess
As Fannie/Freddie crisis deepens, people find China in akward postion because China is the largest holder of 2F’s bonds: total $376.3 billion. I don’t know exactly how China got into this mess, but I think one reason is decision maker in China must think 2F bonds are safe because of US goverment implicit gurantee. At least the market thinks so because the rating agency S&P, Moody and Fitch all gave Fannie/Freddie top rating. But wait a minute, didn’t those rating agency give a pass to those toxic MBS and CDOs? One thing I am sure is the China 2F buyers’ job are still safe, because at least they did better than the guys bought Blackstone at IPO, bought Morgan Stanley at $50s couple months ago.

Financial companies using lots of oil?

What a week in the stock market last week. All the financial stocks, good or bad, got a big boost after Wells Fargo and JP Morgan announced better than expected earning, with the retreat of oil price from high $140s to less than $130. Financial companies certainly don’t use oil as direct inputs, but it appears the smart money has flow from oil (energy) to financials, in addition to the short covering after SEC says stopping nakes shorts on Fannie, Freddie and primary brokers. So go short the big bad oils, not the big bad GSEs and wall street banks…

Eat/drink Oberweis ice cream/milk, not Oberweis fund
The latest Barrons (July 21) featured Oberweis fund, which is not new to me because I read it from Fortune (columnist) couple months ago. The thing interesting is Oberweis fund lost to its benchmark Russell 2500 Growth Index in last 3, 5, and 10 years: in the respective period, Oberweis Mid-Cap (OBMDX) annualized returns were 4.8%, 6.2% and 4.4%, vs. 5.2%, 9.8% and 4.8% for the index.

So why should a rational investor hand his/her money to Mr. Oberweis? I just don’t get it.

Starbucks closing
Starbucks is closing 600 US stores in the near future. Here is the list (PDF) from their web site. It seems SBUX initially was reluctant to share this information, it did so after pressure from local communities. A sad thing for coffee lovers and the affected 12,000 employess.

Appendix:
WSJ: Why no outrage?
“For every dollar of equity capital, a well-financed regional bank holds perhaps $10 in loans or securities. Wall Street’s biggest broker-dealers could hardly bear to look themselves in the mirror if they didn’t extend themselves three times further. At the end of 2007, Goldman Sachs had $26 of assets for every dollar of equity. Merrill Lynch had $32, Bear Stearns $34, Morgan Stanley $33 and Lehman Brothers $31. On average, then, about $3 in equity capital per $100 of assets. “Leverage,” as the laying-on of debt is known in the trade, is the Hamburger Helper of finance. It makes a little capital go a long way, often much farther than it safely should. Managing balance sheets as highly leveraged as Wall Street’s requires a keen eye and superb judgment. The rub is that human beings err.”

Hint: the local officials pump up the GDP numbers so that they can get promoted; the corporate CEO/CFO pump up the earning number so that their stock options will be more valuable.

Of course in an ideal world, when the law is enforced, those kind of things will not happen.

Reference:
(Chinese) In this post, a Chinese bank executive describes that the future earning of a bank has already been determined in advance.

(Chinese) Lang Xian Ping (see item 3) describes the “GDP is the king” policy in China and its effect in economy. Link here.

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.

2) Fundamental: I am still no expert on this SRAM and Semi after holding it for one year. But I felt Semi is a tough business in general. Just look at the leaders in Semi such as Intel and NVDA, they make money by volume (while cutting prices). They are also cyclical. People used to say they are commodity business. But if you do grocery shopping, you know the real commodities (eggs, milk, bread…) all raised the price (a lot!) in past year. In other words, compared to food, chips have no pricing power.

The only way for Semi/chip industry to make money is sell more (to offset the R&D, marketing cost). Intel and NVDA can do that by selling more PC and laptops. But GSIT can not duplicate that easily because they derives 30% sales from Cisco, and we know that revenue is relatively flat in last two quarters ($4.0 million). Separately, Cisco is expected to grow revenue at 12% to 17% in next few years. So only if Cisco uses more SRAMs or GSIT finds new markets for SRAMS, the growth for GSIT will be low teens…

Mindray
Mindray (NYSE:MR) reported its first quarter results yesterday, and they got good number. Unfortunately I no longer have the stock: sold my last few shares on April 3. Remember rule No. 2: stock usually goes up after I sold it?

MR Mindray Medical International… Sell Mar 17, 2008 65.00 25.93 7.00
MR Mindray Medical International… Sell Mar 17, 2008 51.00 25.58 7.00
MR Mindray Medical International… Sell Apr 3, 2008 60.00 31.88 7.00

Seriously, I still hold my previous view on MR: at $39 and PE=52, with growth rate of about 45%, it is fully valued.

Interestingly, the company announced it will switch the financial reporting currency from RMB (CNY) to USD. Besides its offically stated reasons, I think there is another compelling reason for them to do so. Can anybody tell me what is that reason?

Here is a 9 minutes introduction of the film on YouTube.

I think this topic is especially relevant now that we appears are in food shortage. What’s the root cause behind it? Is this just supply and demand? How can we ensure the food supply while maintain the safty? Is it make sense (for the goverment) to grant patent to GM seeds or living things?

Mr. Softy missed expectation
Microsoft (Nasdaq: MSFT) had a disappointed earning season, and the main reason is the slow sales on Vista. As pointed by some experts and I agree, this means two things:

1) Microsoft can not sell as many Windows in emerging markets as in the developed countries, because of piracy. From my observation the situation improved in China, but this “anti-piracy” task won’t easy.

2) Mac is gaining market share in PC market, as seen in the Apple’s earning report. Mac appears is doing well in consumer, and education market.

Before the earning many people expect MSFT do wel, because IBM, Intel did well last week, so should MSFT? The problem with this logic is IBM has both software (mainly enterprise) and services, and has lots of overseas exposure; while one can not pirate Intel CPU easily.

Remember a company’s fundamental does not change before and after an analyst wrote a report.

China Mobile’s strength or new growth mainly comes from the rural areas, and data/internet plan in urban areas. While I apploud its management’s forward looking strategy, I am not sure how long this momentum can sustain. Note CHL trades at a much higher price compared to other mobile operators, and it is the No. 1 carrier in the world according to market cap. Here is another interesting Chinese article about China Mobile (from Caijing).

Syngenta is a company I am not very familar, I bought it because I thought the soft commodity boom is real, and SYT is the cheapest among the big agri/seeds/crop protection companies, Monsanto is more expensive and volatile, even considering its growth. I remember a few years ago Europe had strong opposition against Monsanto’s genetic modified seeds, don’t know if this has been changed? A second reason, is I found European companies usually have a more conservative/repsonsible management, they look at things more in long term compared to some US companies (they care more about their own stock options).

ICBC, Goldman Sachs, China Invest Co. and Blackstone

According to news report, Blackstone (BX) is sued by people who claimed the company mis-represented in its IPO prospectus. China Invest Co., which paid $4 billion for about 10% stake shortly before BX’s high profile IPO, did not join the suit. I guess those guys very much like to sue because they have paper loss of more than 1/3 in less than 1 year. Although publicly they said it’s a long term investment and they don’t care about short term performance.

On the other hand, as I said in the other day “ICBC released 2007 results”, Goldman Sachs snatched 5.75% stake of the biggest Chinese bank (ICBC) for meager $2.6 billion in early 2006, now the investment went up more than 400%. Guys at China Invest Co, learn from the Goldman Sachs guys

Let it be
I learned this Taosim from Xiao Ke, my bro in law. He suggested this 无为 (not do anything), when he heard I was teaching my wife about driving. I think this could apply to investing in stock market as well. I am not saying “just buy and hold”, I am thinking not to “tape reading”, or “紧盯大盘” all the time. Maybe I should apply “let it be” to the China Invest Co. BX fiasco, and Goldman Sachs steal of ICBC, because after all, I am just a little migrant worker.

The company based in Niwot, Colorado, whose vibrantly colored shoes, clogs and boots have become a fad in recent years, also backed its 2008 profit outlook of $2.70 and revenue view of $1.16 billion.

Analysts were expecting a profit of $2.72, before items, on revenue of $1.16 billion.

The stock dropped about 10% after hour. I am not sure if it will recover like AMZN did after its earning couple weeks ago. As I was listening the Conferece call, one analyst asked if people under-appreciated Crocs’ infrustructure, he even said Crocs is like a global supply chain company happens to make and distribute shoes. Interesting point, Crocs has 5,000 employee worldwide as of now.

1) I don’t think this will be a strong quarter due to seasonality: it’s winter in Europe and Japan, and in winter they don’t wear Crocs as the American do.

2) Inventory: if the 1) holds, the inventory (classics and Cayman) they built up last quarter will not reduce dramatically. The managment also said in last CC they expect those inventories to ship for Spring 08. This is not good news.

3) Cash flow: they will not have cash flow statement in press release; they will have it in the 10-Q, 10-K afterwards. But don’t expect too much from it. As I said in my earlier post titled “stock option helped Crocs cash flow”, this magic will not work any more now that the stock is beated down.

Positives
The expectation is much lower than 3 months ago. Many people have given up on them, including respected Oppenheimer funds. Another lawsuit in New York regarding the escalator incident. The stock trades at 16 times 2007 earning. While I think a PE of 45 three months ago is a bubble, this PE of 16 seems reasonable for a (fashion) footwear company. Everyone will get the rebate check in the May and buy the Crocs (not the iPod), right?

Seriously, I am looking to exit the Crocs positions and get something more solid (less hype).